Strategic Audit
Federal Express
Ghofran Alhouthy
Hadeel Maoodhah
Noor Ganem
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Table of Contents
I. CURRENT SITUATION .....................................................................................................................1
A. Current Performance .......................................................................................................................................... 1
B. Strategic Posture................................................................................................................................................. 1
II. CORPORATE GOVERNANCE ........................................................................................................2
A. Board of Directors .............................................................................................................................................. 2
1. Board Members and Length of
Service……………………………………………..………………………………………………………2
2. Stock and Stock Ownership…………………………….…………………………………………………4
3. Relevant Knowledge, skills, background, and connections………………….……………………………5
4. Committee Structure, Membership and Responsibilities…………………………………….……………7
B. Top Management ............................................................................................................................................... 9
1. Top Management
Composition……………………………………………………………………………………………….9
a. FedEx Corporation Executive Committee……………………….………………………………9
b. Operating Company CEOs…………………………………..…………………………………10
c. International Executives………………………………………..………………………………12
2. Top Management………..……………………………………………………………………………….13
3. Top Management’s Role: Rewards, Responsibilities, and Expectations……………...…………………13
4. Key Employee Stock Ownership…………………………..…………………………………………….14
III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREATS (SWOT)...................... 14
A. Natural Physical Environment: Sustainability Issues ....................................................................................... 14
B. Societal Environment ....................................................................................................................................... 15
1. Economic…………………………………………………………………………………………………....15
2. Technological…………………………….…………………………………………………………………16
3. Political-Legal………………………………………………………………………………………………16
4. Sociocultural……………………………………….………………………………………………………..17
C. Task Environment ............................................................................................................................................ 17
1. Threat of New Entrants…………………………..………………………………………………………….17
2. Bargaining Power of Buyers…………...……………………………………………………………………17
3. Threat of Substitute Products and Services…………………………………………...…………………….18
4. Bargaining Power of Suppliers…………………………………………….………………………………..18
5. Rivalry Among Competing Firms……………………………………….………………………………….18
6. Relative Power or Unions, Governments, Special Interest Groups……...………………………………….18
a. Labor Unions………………………………………..……………………………………………….18
b. Government…………………………………………………………...……………………………..19
D.
Summary of External Factors .......................................................................................................................... 19
IV. INTERNAL ENVIRONMENT: STRENGHTS AND WEAKNESSES (SWOT) ........................ 21
A. Corporate Structure .......................................................................................................................................... 21
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B. Corporate Culture ............................................................................................................................................. 24
C. Corporate Resources ........................................................................................................................................ 26
1. Marketing……………………………………………………………………………………………………26
2. Finance………………………………………………………..……………………………………………..27
3. Research and Development…………………………………………………………………………………28
4. Operations and Logistics……………………………………………………………………………………29
5. Human Resource Management…………..…………………………………………………………………34
6. Information Technologies……...……………………………………………………………………………38
D.
Summary of Internal Factors ........................................................................................................................... 39
V. ANALYSIS OF STRATEGIC FACTORS (SWOT) ........................................................................ 40
A. Situational Analysis ......................................................................................................................................... 40
B. Review of Mission and Objectives ................................................................................................................... 41
VI. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY ..................................... 42
A. Strategic Alternatives .................................................................................................................................... 42
B. Recommended Strategy……………………………………………………………..………………………44
VII. IMPLEMENTATION ...................................................................................................................... 44
VIII. EVALUATION AND CONTROL ................................................................................................. 45
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I.
Current Situation
A.
Current Performance
Fed Ex (FDX) has managed to see it through the recent recession and hard economic times by
having a successful year in 2010. In the beginning of the year Fed Ex’s earnings were down
considerably, but they managed to turn it around. FedEx’s share price rose from $55.43 to
$83.49, a gain of over 50% throughout the year eclipsing other benchmarks like the S&P 500 and
the DJIA. They also ended the year with a net income of $1.2 billion. FedEx had several
measures in place to leverage against the recession and make it easier on the company during
those difficult times. Revenue was only down 2.25% from 2009, due to the tough economy and
the measures FedEx had taken to combat the recession. Fed Ex is also the dominant leader in
market share, controlling about 49% of the market by volume. Their diluted earnings per share
rose from $0.31 in 2009 to $3.76 in 2010, an increase of over ten times and almost an 8%
increase for return on average equity due to a $1.2 billion goodwill charge, stemming mostly
from the purchase and acquisition of new assets.
B.
Strategic Posture
Mission Statement: Fed Ex’s mission statement is to produce superior financial returns for
shareholders by providing services through focused operating companies. Expectations and
requirements of customers will be met in the highest quality manner possible in each market
segment. Safety will be the first consideration in all operations and corporate activities will be
conducted and held to the highest ethical and professional standards.
Objectives: Fed Ex’s objectives are not explicitly outlined, however, their annual report for 2010
indicates that their objectives are to become the premier less-than-truckload provider, market
leaders, and the most profitable carrier.
Strategies: Fed Ex’s strategy is to work seamlessly and simultaneously on three specific levels.
First, they need to compete collectively by being seen at all times as one company, one brand.
Second, they need to operate independently by focusing on individual networks and market
segments in order to meet the distinct needs of every customer. Third, they need to manage
collaboratively in order to maintain good relationships with their workforce, customers, and
investors alike.
Policies: FedEx has a few strong policies such as auditor policy, whistleblower policy, privacy
policy, and political contributions policy in place. These policies are in place to maintain loyalty
to employees, customers, and investors by maintaining integrity. They deal with an array of
potential hazards such as risk, loss, exposure, and corruption. These policies are in line with
FedEx’s mission and objectives and do a good job of outlining the detail involved in protecting
and maintaining their integrity as a company.
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II.
Corporate Governance
A.
Board of Directors:
Each Director is elected at the annual meeting of stockholders and holds office until the next
annual stockholders’ meeting. Although there are no term limits, policy dictates a mandatory
retirement age of 72. At least once per year, the independent Directors meet without
management present. When the Chairman of the Board is not present, the meetings are directed
by the Chairman of the Nominating and Governance Committee. The Board reviews governance
policies and practices annually and promotes needed changes when they see fit. The Board of
Directors is comprised of one internal and ten external members. In line with their diversity
commitment, FedEx seeks highly qualified Directors including women (such as Dr. Jackson and
Dr. Schwab) and minorities (such as Dr. Jackson and Mr. J. Smith).
The Bylaws state that the Chairman of the Board shall be the CEO unless the Board decides
otherwise. The Chairman/CEO presides at all meetings of the stockholders and Board of
Directors. The Chairman is responsible for managing the Board and ensuring that it functions
effectively and fulfills its responsibilities. The CEO is responsible to the Board for day to day
management of FedEx. The current leadership structure attains a balance between dependable
leadership and the independent oversight of FedEx. The Board is comprised of a varied mix of
experience and perspectives:
1.
Board Members and Length of Service:
Frederick W. Smith, 66, is the Founder, Chairman, President, and CEO of FedEx and has
served on the board since its inception. Formerly, Smith was Chairman of the Board of
Governors for the International Air Transport Association and the U.S. Air Transport
Association, Chairman of the U.S.-China Business Council, and served as co-chairman to the
U.S. World War II Memorial Project and the campaign for the National Museum of the Marine
Corps. Currently, Smith is a member of the Business Roundtable, is a board member for the
Council on Foreign Relations, is co-chairman of the Energy Security Leadership Council, and is
the current chairman of the French-American Business Council. In November, Smith will
receive the George C. Marshall Foundation Award and be honored for his success in “building a
company that has changed business around the world and for the generous use of FedEx
resources to provide humanitarian assistance to countries and regions in need.” (FedEx, News)
James L. Barksdale, 66, has been the Chairman, CEO and President of Barksdale Management
Corporation (a philanthropic investment company) since its foundation in 1999. He was
previously employed by Federal Express as EVP and COO from 1983-1992 and as CIO from
1979-1983. Barksdale has over 35 years of operational experience and has worked on the
President’s Foreign Intelligence Advisory Board. He also is a Director for: Oracle, Time
Warner, Revolution Health Group LLC, TechNet, and SubmitOrder.com. Barksdale serves on
the Mayo Clinic’s Board of Trustees and as Co-Chair of the Markle Foundation Task Force on
National Security in the Information Age (Bloomberg). Barksdale has served as a board member
for FedEx since 1999 (and also served a prior term from 1983-1991).
John A. Edwardson, 60, is CEO and Chairman of CDW Corporation, a firm that provides
technology products and services for business, government, and education markets. CDW
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provides solutions such as infrastructure optimization, mobility, disaster recovery, and security
management. Previously, he served as President, CEO, and Chairman of Burns International
Services (a provider of security services) and as President of UAL Corporation and United Air
lines, Inc. He serves as a Board member for Focal Communications Corporation, Loomis, and
Fargo & Co., and serves on the Board of Trustees of Purdue University and The Chicago
Symphony Orchestra. He also serves on the Advisory Council of the University Of Chicago
Graduate School Of Business. Edwardson has been a board member at FedEx since 2003.
Joseph R. Hyde III, 67, serves as the Chairman of GTx, Inc., a biopharmaceutical company that
engages in the discovery, development, and commercialization of small molecules to treat
cancer, bone loss, and serious medical conditions. He is the owner and President of Pittco
Holdings, Inc., an investment management company and was Founder of AutoZone which was a
division of Malone & Hyde. He also serves as a Director for AutoZone, Inc. is Chairman of the
Financial Advisory Board at MB Venture Partners, and was a former Director for Wal-Mart.
Hyde has served on the FedEx board since 1977 but has announced his retirement.
Shirley Ann Jackson, PhD., 63, is the President of Rensselaer Polytechnic Institute (RPI). She
has served as a Commissioner of the U.S. Nuclear Regulatory Commission, as a Professor of
Theoretical Physics at Rutgers University, and as Consultant in semiconductor theory to AT&T
Bell Laboratories. She holds 18 honorary degrees, was awarded the New Jersey Governor's
Award in Science and was inducted into the National Women's Hall of Fame. She also serves
as: Chairman of the Board for the NYSE Regulation, Inc., Director for New Jersey National
Bank, Trustee for Emma Willard School, Trustee for The Brookings Institution, a member of the
Board of Governors for the Financial Industry Regulatory Authority, Inc., a member of the
Audit, Nominating, and Corporate Governance Committees for the Smithsonian Institution, and
as a director for the Council on Foreign Relations, Inc.. Jackson also serves as the Chairwoman
of the American Association for the Advancement of Science, and has served as the Chairwoman
of NYSE Regulation Inc. Jackson has been a FedEx board member since 1999.
Steven R. Loranger, 58, is CEO and President of ITT Corporation, whose Defense segment
provides situational awareness, tactical information systems, communications, engineering, and
electronic warfare systems for the military. He oversaw Textron's Six Sigma Integrated Supply
Chain and Information Technology groups. He also is a member of the Board of Governors for
Aerospace Industries Association and serves on the National Association of Manufacturers and
the Congressional Medal of Honor boards. Loranger has been a Director for FedEx since 2006.
Gary W. Loveman, PhD., 49, is Chairman, president, and CEO of Harrah’s Entertainment, Inc.
Prior to joining Harrah’s, he was Associate Professor of Business Administration at the Harvard
University Graduate School of Business Administration, and holds a PhD in economics. He is
also a director of Harrah’s Entertainment and a board member of Coach, Inc. Loveman has been
a board member with FedEx since 2007.
Susan C. Schwab, PhD., 54, has held several positions in the U.S. Government and served as
the U.S. Trade Representative Ambassador until 2009. She served as the Director General of the
U.S. & Foreign Commercial Service of the U.S. Department of Commerce and was a Trade
Policy Officer at the U.S. Embassy in Tokyo. She has served as President and CEO of the
University System of Maryland Foundation, Inc. She holds a PhD in Public Administration and
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International Business. She is also a Director and member of the Audit and Finance Committees
for Boeing and a Director for Caterpillar, Inc. Schwab was elected to the FedEx Board in 2009.
Joshua I. Smith, 68, is an Advisor of Datawind, a developer of wireless web access products
and services. He is also the Chairman and Managing Partner of The Coaching Group where he
functions as Coach and Senior Advisor/Consultant to CEOs of portfolio companies. Smith
chaired the special Task Force on Minority Business Reform in Maryland. He was the Chairman
of the U.S. Commission on Minority Business Development the Chairman of the National Urban
Coalition. Smith has been a FedEx Director since 1989. He also serves on the Board of
Directors of the National Black Chamber of Commerce. Smith has received over 300 awards,
honors and other citations in recognition of his achievements (Bloomberg, Smith). He also
serves as a Director for: StingFree Technologies Co., Caterpillar, Allstate Corporation, and as
Vice Chairman for Comprehensive Care Corp. Smith has been a Director for FedEx since 1989.
David P. Steiner, 49, is president and CEO of Waste Management of Arizona, Inc. Prior to
joining Waste Management, he was a partner in the regional law firm of Phelps Dunbar LLP. He
is also a Director for Greater Houston Partnership and a committee Chairman for Tyco
Electronics, Ltd. Steiner was elected as a FedEx Director in 2009.
Paul S. Walsh, 54, I the CEO and Executive Director of Diageo PLC at Diageo Ireland, a
company that engages in producing, distilling/brewing, packaging, distributing, and marketing
spirits. He was also CEO and COO of Guinness United Distillers & Vintners and was President
and CEO of the Pillsbury Company. Walsh has held various financial positions in the food,
brewing, and Inter-Continental Hotel fields. He is also a Non-Executive Director for Unilever
PLC and Unilever NV, and is a former Director for General Mills, Inc. and Centrica PLC (an
integrated energy company is the UK). Walsh has been a Director with FedEx since 1996.
2. Stock and Stock Ownership:
FedEx is publicly traded as FDX on the NYSE. 800 million shares of Common stock are
authorized, with 314,594,409 shares outstanding on 8/2/10. All stock holds the same voting
rights. The following table shows the amount of FedEx common stock beneficially owned by
each director:
Name of Owner:
Frederick W. Smith
James L. Barksdale
John A. Edwardson
Shirley A. Jackson
Steven R. Loranger
Gary w. Loveman
Susan C. Schwab
Joshua I. Smith
David P. Steiner
Paul S. Walsh
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Number of Shares:
19,705,437
46,800
15,000
7,000
7,800
10,414
2,050
5,086
8,500
Number of Option Shares:
2,138,762
38,040
46,040
32,040
19,640
15,240
10,840
43,040
6,440
50,040
3. Relevant Knowledge, Skills, Background, and Connections:
Transportation Industry Experience: Each nominee possesses transportation industry
experience by virtue of their service on the FedEx Board of Directors. Each of the following
members has extensive additional transportation industry experience and knowledge:
•
•
•
•
•
Frederick Smith is the pioneer of the express transportation industry. Under his
stewardship, FedEx has experienced strong long-term financial growth and stockholder
return.
Mr. Barksdale held various senior management positions, including EVP and COO at
FedEx from 1979 to 1992.
Mr. Edwardson was President and COO of a major airline (United).
Mr. Loranger is CEO of a leading provider of products and services to the defense and
aerospace industries (ITT). He was EVP and COO of a global aircraft manufacturing
company (Textron, which includes Bell Helicopter and Cessna Aircraft). He was
president and CEO of a high-technology aerospace business (a division of AlliedSignal,
Inc.) and was president of a heavy trucking company (Bendix Truck Brake Systems
Group).
Mr. Steiner is CEO of a company (Waste Management) that transports waste materials.
International Experience: FedEx continues to position itself to develop and capitalize on
increasing globalization, which emphasizes the significance of having directors with specific
experience in international trades and markets:
•
•
•
•
•
Frederick Smith leads FedEx, which serves more than 220 countries and territories. He
serves on the board of the Council on Foreign Relations; he has served as chairman of the
U.S.-China Business Council, and is the current chairman of the French-American
Business Council.
Dr. Jackson is the former Chairwoman and Commissioner of the United States Nuclear
Regulatory Commission, she participated in the International Nuclear Regulatory
Association, and she is directly involved with the World Economic Forum and is a
member of the Council on Foreign Relations.
Mr. Loranger is the CEO of a large multinational corporation (ITT).
Dr. Schwab, the former United States Trade Representative, has extensive experience
leading large international trade negotiations.
Mr. Walsh is the CEO of a U.K.-based large multinational corporation (Diageo).
Financial Expertise: FedEx uses financial targets as measures of success, therefore, an
understanding of finance, financial reporting, and internal auditing processes is necessary for
FedEx directors. Each of the below members of the board has an extensive background in
finance:
•
Mr. Edwardson, who has an MBA, was the CFO of two public companies: Northwest
Airlines Corporation and Ameritech Corporation (a provider of telecommunications
products and services).
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•
•
•
•
•
Dr. Jackson has numerous years of public company audit committee experience. She
currently serves on three public company audit committees (Marathon Oil – as chair,
Medtronic and Public Service Enterprise Group).
Mr. Loveman, who has a Ph.D. in economics and a B.A. in economics, was an associate
professor of business administration at the Harvard University Graduate School of
Business Administration before joining Harrah’s Entertainment. He has also worked at
the Federal Reserve Bank of Boston.
Mr. J. Smith, took graduate courses in accounting and finance and has many years of
public company audit committee experience. He is Chairman and Managing Partner of a
consulting firm (The Coaching Group) that, among other things, assists its clients in
writing business plans and preparing financial statements in preparation for debt and
equity funding.
Mr. Steiner, who has an accounting degree, was CFO of Waste Management before
becoming its CEO.
Mr. Walsh was CFO of Grand Metropolitan PLC (a major division at a U.K.-based public
company).
Marketing Expertise: As one of the most recognized brands in the world, importance is given to
advancing and protecting the FedEx brand. FedEx benefits from having directors with extensive
marketing expertise and experience:
•
•
•
Mr. Hyde has retail marketing experience as CEO of AutoZone, a leading auto parts
retailer and distributor, and Malone & Hyde, a leading food retailer and distributor, and
as a former Director for Wal-Mart.
Mr. Loveman has led several successful marketing initiatives at Harrah’s and previously
taught marketing-related courses at the Harvard University Graduate School of Business
Administration.
Mr. Walsh leads a company (Diageo) that owes much of its success to effective brand
marketing.
Technological Expertise: FedEx relies greatly on technology for operations, and market
competition relies on the superiority and reliability of their technology networks. Thus, directors
who possess a thorough understanding of technology applications are important:
•
•
•
•
Mr. Barksdale held executive positions with multiple technology companies, including
CEO of Netscape and AT&T Wireless. He was the co-chair of the Markle Foundation
Task Force on National Security in the Information Age.
Mr. Edwardson is the CEO of a technology products and services provider (CDW).
Dr. Jackson, who holds undergraduate and doctorate degrees in physics from the
Massachusetts Institute of Technology, is the president of a world-renowned
technological research university (RPI). She also serves on the board of directors of
IBM, a multinational computer technology and IT consulting corporation.
Mr. Loranger has held senior executive positions with assorted high-technology
engineering and manufacturing companies: ITT, Textron, Honeywell and AlliedSignal.
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Energy Expertise: FedEx is committed to protecting the environment, and has many initiatives
in progress to reduce energy use and minimize their environmental footprint. As FedEx
implements and advances these initiatives, FedEx relies on the expertise and direction of board
members who are actively involved with environmental sustainability issues:
•
•
•
Mr. Smith is co-chairman of the Energy Security Leadership Council, a project of
Securing America’s Future Energy (with a goal to reduce U.S. oil dependence and
improve energy security).
Dr. Jackson is the former Chairwoman and Commissioner of the United States Nuclear
Regulatory Commission and serves as university vice-chairwoman of the U.S. Council on
Competitiveness and co-chairwoman of its Energy Security, Innovation & Sustainability
Initiative. She also serves on the Board of Directors of Marathon Oil, an international
energy company.
Mr. Steiner is CEO of Waste Management, a company that has taken an industry
leadership role in converting waste to renewable energy.
Government Experience: The transportation business is heavily regulated and directly affected
by governmental policies and actions. Through their knowledge and connections, Directors with
extensive government service help FedEx work beneficially and constructively with domestic
and foreign governments:
•
•
•
•
Mr. Barksdale served on the U.S. President’s Intelligence Advisory Board.
Dr. Jackson is the former Chairwoman and Commissioner of the United States Nuclear
Regulatory Commission and serves on the President’s Council of Advisors on Science
and Technology.
Mr. Loranger served as an officer and pilot in the U.S. Navy, is a trustee for the National
Air and Space Museum and the Congressional Medal of Honor Foundation, and has held
executive management positions with some of the largest government contractors in the
United States (ITT, Textron, Honeywell and AlliedSignal).
Ambassador Schwab is the former United States Trade Representative.
4. Committee Structure, Membership and Responsibilities:
Audit Committee: The Audit Committee, comprised of John A. Edwardson (Chairman), Gary
W. Loveman, Joshua I. Smith, and David P. Steiner, performs the following functions:
•
•
Reviews and discusses with management the company’s major financial risk exposures
and the steps management has taken to monitor and control such exposures Oversees the
independent registered public accounting firm’s qualifications, independence and
performance;
Assists the Board of Directors in its oversight of (i) financial statements integrity; (ii) the
effectiveness of disclosure controls and internal control over financial reporting; (iii) the
performance of the internal auditors; and (iv) compliance with legal and regulatory
requirements;
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•
Pre-approves all audit and allowable non-audit services to be provided by FedEx’s
independent registered public accounting firm.
Compensation Committee: The Compensation Committee, comprised of Steven R. Loranger
(Chairman), Shirley A. Jackson, Susan C. Schwab, and Paul S. Walsh, performs the following
functions:
•
•
•
•
•
•
Reviews and discusses with management the relationship between the company’s
compensation policies and practices and the company’s risk management, including the
extent to which those policies and practices create or decrease risks for the company;
Evaluates (along with the independent members of the Board), the Chairman of the
Board, President and CEO’s performance and recommends his compensation for
approval by the independent directors;
Discharges the Board’s responsibilities relating to the compensation of executive
management;
Oversees the administration of FedEx’s equity compensation plans and reviews the costs
and structure of key employee benefit and fringe-benefit plans and programs;
reviews the Compensation Discussion and Analysis and recommends whether it should
be included in the proxy statement;
Oversees the administration of FedEx’s equity compensation plans, and reviews the costs
and structure of key employee benefit and fringe-benefit plans and programs.
Information Technology Oversight Committee: The Information Technology Oversight
Committee, comprised of James L. Barksdale (Chairman), J.R. Hyde III, and Gary W. Loveman,
performs the following functions:
•
•
•
•
Reviews and discusses with management the quality and effectiveness of the company’s
information technology (IT) systems and processes, including the extent to which those
systems and processes create or decrease information security and other risks for the
company;
Appraises major information technology (IT) related projects and technology architecture
decisions
Ensures that FedEx’s IT programs effectively support FedEx’s business objectives and
strategies;
Advises FedEx’s senior IT management team and the Board of Directors on IT related
matters;
Nominating & Governance Committee: The Nominating & Governance Committee, comprised
of Shirley A. Jackson (Chairwoman), James L. Barksdale, and Steven R. Loranger, performs the
following functions:
•
Reviews and discusses with management the implementation and effectiveness of the
company’s compliance and ethics programs, including the Code of Business Conduct and
Ethics;
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•
•
•
•
Identifies individuals qualified to become Board members;
Recommends to the Board director nominees to be proposed for election;
Recommends to the Board directors for appointment to Board committees;
Assists the Board in developing and implementing effective corporate governance,
compliance and ethics programs.
B.
1.
Top Management:
Top Management composition:
FedEx Corporation provides strategic direction and consolidated financial reporting for the
operating companies that compete collectively under the FedEx name worldwide: FedEx
Express, FedEx Ground, FedEx Freight, FedEx Office, FedEx Custom Critical, FedEx Trade
Networks, FedEx SupplyChain and FedEx Services.
FedEx Corporation Executive Committee: The five-person Executive Committee plans and
executes the corporation's strategic business activities.
Frederick W. Smith, founder, chairman, president, and CEO of FedEx Corporation: After
earning a B.A. from Yale University in 1966, he served as an officer and pilot in the U.S. Marine
Corps from 1966-1970. In 1971, when Smith was 28, he founded FedEx as “Federal Express
Corporation.” Smith’s idea for an overnight delivery service was originally outlined in his Yale
economics paper about the effects of automation on society. At that time, he identified that air
freight had different requirements than air passenger service and that a company specializing in
air freight (rather than supplementing passenger service) would be a profitable business niche.
Smith’s vision, supplemented with insight gained during his military service, dealt with the
demand side of FedEx and focused on location and speed rather than cost. His strategy had two
important elements: The first included shipping packages through a central, tightly controlled
hub to ensure overnight delivery. The second was to build a private aircraft fleet.
Smith has been politically active as a proponent of regulatory reform, free trade and “open skies
agreements” for aviation around the world, and has advocated for vehicle energy-efficiency
standards and a national energy policy. He has received numerous awards and honors, including:
the Circle of Honor Award from the Congressional Medal of Honor Foundation, the Lone Sailor
Award from the U.S. Navy Memorial, the 2010 President’s Award from the Transportation
Research Forum, the Marine for Life Award from the United States Marine Corps, the UCLA
Anderson School of Management’s John Wooden Global Leadership Award, was named 2006
Person of the Year by the French-American Chamber of Commerce and received the Medal of
Honor from the American Chamber of Commerce in France.
Alan B. Graf, Jr., EVP and CFO of FedEx Corporation: He is responsible for all aspects of
global financial functions (taxes, accounting controls, treasury, internal audits, etc.) Prior to the
FedEx Corp. formation, Graf was EVP and CFO of FedEx Express. He joined the company in
1980 as a senior financial analyst. He serves on the Board of Directors for NIKE, Mid-America
Apartment Communities, Methodist Healthcare and the Memphis and Shelby County Sports
Development Corporation. Graf holds a bachelor’s degree and MBA from the Kelley School of
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Business, where he is a member of the Academy of Alumni Fellows. Graf was named a CFO
magazine Excellence Award winner in 1998.
Robert B. Carter, CIO and Information Services EVP: He is responsible for setting technology
direction, overseeing technology infrastructure and key applications, and managing the advanced
networks and data centers. Carter joined FedEx in 1993 and has over 30 years of systems
development and implementation experience. He has a bachelor's degree in Computer and
Information Science and a master's degree from the University of South Florida. Carter's
professional awards include: On Fast Company magazine’s "100 Most Creative People in
Business" (2010); Information Week’s Chief of the Year Award (2000, 2001, 2005); CIO
magazine's 100 Award (2000, 2001, 2002, 2003, 2004, 2006); and InfoWorld Chief Technology
Officer of the Year (2000). Carter is a member of the Saks Inc. board of directors and the
University of Florida Foundation board of trustees. He also serves as chairman of the Capital
Campaign for the University of Tennessee Hamilton Eye Institute.
T. Michael Glenn, EVP, Market Development and Corporate Communications, and CEO of
FedEx Corporate Services: He is responsible for the marketing, sales, and retail operation
functions for all FedEx operating companies. Glenn was senior VP, Worldwide Marketing,
Customer Service and Corporate Communications for FedEx Express before FedEx Corp was
formed in 1998. In that role, he directed marketing, communications, customer service,
employee, and public relations activities. Glenn has held various Sales and Marketing positions
since joining FedEx in 1981. He has a bachelor's and master’s degree, and serves on the board of
directors for: Renasant Bank, Pentair, Inc., United Way of the Mid-South and Autism Speaks.
Christine P. Richards, EVP, General Counsel and Secretary: She is responsible for ensuring
global activities are in compliance with international, federal, state and local government
regulations, and is responsible for international and domestic legal, security and government
affairs for the all FedEx operating companies and subsidiaries. Richards served as corporate VP
of Customer and Business Transactions before assuming her current position in June 2005. She
joined FedEx in 1984 from private practice. Richards earned her J.D. from Duke University.
Operating Company CEOs:
David J. Bronczek, President and CEO of FedEx Express: He assumed his current position
after serving as EVP and COO. He also serves on the Senior Management Committee for FedEx
Corp. Bronczek started in operations in 1976 and has worked his way up from a sales rep
position. He moved into international operations in 1987. In 1993, he was named senior VP of
Europe, the Middle East and Africa (EMEA). Bronczek has a bachelor’s degree in Business
Administration. He was recently appointed by the President of the United States to the National
Infrastructure Advisory Council (NIAC); he is a member of the Board of Governors of the
International Air Transport Association, a member of the Board of Directors for International
Paper, vice chairman for the Board of Visitors of the University of Memphis, and a member of
the Board of Governors for National Safe Kids Campaign. . He was a Member of the Board of
Trustees at International School of Brussels and was a Member of the Toronto Board of Trade.
David F. Rebholz, President and CEO, FedEx Ground: He assumed his current position in
January 2007 and is responsible for the strategic direction and performance of the company. He
also serves on the Strategic Management Committee of FedEx Corp. Prior to joining FedEx
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Ground, he was EVP, Operations and Systems Support for FedEx Express. His responsibilities
included Air Operations, U.S. Air-Ground and Freight Services, U.S. Ground Operations,
Customer Service and Central Support Services. In that capacity, he managed nearly half of the
corporation’s worldwide employment. Rebholz began his career with FedEx in 1976 as a parttime employee and moved into management in 1978. He was appointed EVP, Operations and
Systems Support, in December 1999. Rebholz attended the University of Wisconsin -Milwaukee.
William J. Logue, CEO, FedEx Freight: Prior to 2010, Logue was President and CEO of FedEx
Freight. He serves on the FedEx Strategic Management Committee. Logue joined FedEx
Express in 1989 through the Flying Tiger acquisition and has held various positions in the
operations area including senior VP-US Domestic Ground Operations, senior VP of Air-Ground
and Freight Services, VP of the Memphis World Hub, and managing director of the Newark
Hub. Prior to his current position, Logue was EVP and COO of FedEx Express-U.S., where he
was responsible for Air Operations, Air Ground and Freight Services, Central Support Services,
and Domestic Ground Operations. Logue serves on the board of directors for United Way and as
a member of the American Trucking Associations (ATA) executive committee.
Brian Phillips, President and CEO, FedEx Office: Philips is responsible the strategic direction,
product and service, and growth and development for more than 1,900 locations and 22,000 team
members in 11 countries. He oversees the company’s worldwide business performance. Philips
joined FedEx in1993 and served as VP of U.S. marketing at FedEx Services, where his
responsibilities included: advertising, global brand management, segment and retail marketing,
and sponsorship marketing efforts. In 1996, he gained international operations experience when
he was promoted to managing director of marketing for the Latin America and Caribbean (LAC)
division. He has an MBA and serves on the executive committee for The United Way.
Craig M. Simon, President and CEO, FedEx SupplyChain: He is responsible for helping
customers turn supply chain management into a competitive strategy through specialty services
including critical inventory logistics, transportation management, and cross dock and dock
services. Previously, Simon served as VP of FedEx Solutions for FedEx Services where he led a
team of logistics and business consultants. Before joining FedEx in 1999, Simon was a business
advisor and worked with Fortune 500 companies focusing on supply chain strategy development
and operations improvement. Simon has a Bachelor of Science in Mechanical Engineering and a
Bachelor of Arts in History. He is certified in production and inventory management (CPIM)
from the American Production and Inventory Control Society (APICS).
Fred Schardt, President and CEO of FedEx Trade Networks: He is responsible for leadership
and strategic direction of global transportation services, value-added logistics solutions, and
comprehensive customs brokerage services. Schardt joined FedEx Trade Networks in 2008 as
EVP and COO. Since then, he has realigned operations and standardized services to optimize
international freight forwarding and has led aggressive international expansion. Prior to FedEx,
he gained 35 ears of hands-on knowledge of the international freight forwarding, transportation
and logistics industries. Schardt holds a Bachelor of Arts degree in Political Science.
Virginia C. Albanese, President and CEO of FedEx Custom Critical: She is responsible for
critical-shipment carrier service across the U.S. and Canada and to other countries throughout the
world. Since joining Custom Critical in 1986, Albanese has worked led the reorganization of the
safety department, led a cultural initiative to refocus on customer satisfaction, reorganized the
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company's recruiting organization and expanded the operations leadership team. As VP of
customer service and operations, she led the company's overall operations. Albanese has a
Bachelor of Science degree and an Executive MBA. She serves on the boards of the Greater
Akron Chamber of Commerce and The Boys and Girls Club of the Western Reserve.
International Executives:
Michael L. Ducker, COO, EVP and President FedEx Express International: In these roles
Ducker leads all customer-facing aspects of U.S. operations and sets strategic direction for
international business. For over eight years, Ducker has led efforts to open foreign markets,
improve customs procedures, and support international economic policy reforms around the
world. He started at FedEx in 1975 as a package handler in the Memphis hub. He has worked as
president of FedEx Express Asia Pacific region in Hong Kong, has led the South East Asia and
Middle East regions from Singapore, and served as VP of Southern Europe, based in Milan. He
is Chairman of the International Policy Committee and executive board member of the U.S.
Chamber of Commerce and a board member of the Coalition of Service Industries and Junior
Achievement Worldwide. He holds an MBA.
David Binks, President, FedEx Express, Canada Region: Binks assumed this position in 2006,
manages more than 5000 employees, and plans, organizes, and implements all corporate
strategies and operations for Canada. Binks joined FedEx in 1986 as a pricing manager in the
UK. He has held management positions in Europe, the Middle East, India and Africa Regions. A
native of the UK, Binks earned a bachelor’s degree with honors and is a member of the Canadian
Council of Chief Executives and the Board of Governors for Junior Achievement of Peel Region.
David L. Cunningham: President, FedEx Express, Asia Pacific Region (APAC): He is
responsible for all corporate strategies and operations for the North Pacific operations based in
Tokyo, the China operations based in Shanghai, and South Pacific operations based in Singapore.
He assumed this position in 1999 after serving as regional VP. Cunningham joined FedEx in
1982. He is a member of the U.S. Association of South East Asian Nations (US-ASEAN)
Business Council, the National Center for Asia Pacific Economic Cooperation (APEC), the
Pacific Economic Cooperation Council, the Pacific Basin Economic Council and the U.S.-China
Business Council. He serves on the board of governors of the American Chamber of Commerce
in Hong Kong. He has a bachelor’s degree in finance and masters in marketing.
Juan N. Centro, President, FedEx Express, Latin America-Caribbean Region (LAC): Cento is
responsible for more than 3,400 employees in over 50 countries. He focuses on increasing FedEx
Express’ presence throughout Latin America and the Caribbean, and integrating that region into
the FedEx global network. He has over 30 years of experience in the air cargo/express
transportation industry. He worked with the Flying Tigers Line and transitioned to FedEx in
1989 when the two companies merged. Prior to this position, he was VP of Mexico and Central
America. He sits on the Board of Directors of Assurant, is part of the Board of Trustees for the
Free Trade Area of The Americas (FTAA), sits on the Board of the U.S. Hispanic Chamber of
Commerce, and was recently named Chairman of the Board of CLADEC (Conference of Latin
American and Caribbean Express Companies). A Cuba native, Cento attended Miami-Dade
Community College and Florida International University College of Business Administration.
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2.
Top Management Information:
Many top executives have international experience, have risen through the ranks, and have
technological expertise. With the exception of Schardt, all key employees have worked for
FedEx over 10 years and have been promoted from within. All but two of the senior executives
have been in their current position longer than three years. This tracks with the FedEx strong
training and leadership programs that are part of the corporate culture. As other companies are
acquired, some executives from those firms are included as part of the management team, as was
the case with William Logue and Juan Centro. Management participates in continued training
and leadership programs. Many key executives sit as Directors on other boards; which expands
their knowledge and generates additional views, contacts, and strategies that might not be gained
or developed from working within the boundaries of FedEx corporate walls alone. Due to these
practices and exposures, top management maintains cutting edge information and alliances that
support their ability to sufficiently cope with likely future challenges.
3.
Top Management’s Role: Rewards, Responsibilities, and Expectations
FedEx management has a reputation for excellence in performance and leadership. Overall, key
employees have long tenure with global expertise. As such, employees are attractive targets for
other companies and are aggressively recruited. As part of their commitment to shareholders,
FedEx compensates their employees at the upper 75th percentile for comparable positions.
FedEx employs a pay for performance philosophy, thus, top management has a considerable
interest in the financial performance of FedEx as a whole. FedEx’s executive compensation
philosophy entails closely aligning executive compensation with the performance of the
company on both a short and long term basis. Performance goals are set to support core longterm financial goals, and preclude promotion of excessive risk. These goals include (FedEx,
DEF14A):
•
•
•
•
•
Growing revenue by 10% per year,
Achieving a 10% plus operating margin,
Increasing ESP by 10% to 15% per year,
Improving cash flow,
Increasing returns, such as return on investment capital.
Although FedEx does not overtly reveal their management policies, they can be generally
interpreted from information found on the corporate website, in annual reports, and in the global
citizen report. Management strategy is expected to be innovative, bold and forceful, while
balancing risk exposure. Management is expected to maintain a strong commitment to ethics and
personal integrity, with a call to this action included in the corporate mission statement,
corporate strategy, and most corporate objectives.
High performance and personal standards are communicated by the CEO. All management
personnel must adhere to the Code of Business Conduct and Ethics and ensure that those who
report to them adhere to the Code as well. Ethics are highly emphasized in the corporate culture
and programs are in place to emphasize and promote charitable acts and environmental
sustainability.
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Key personnel are accountable for day to day responsibilities of assessing and managing the
company’s risks and exposures. Overall strategy entails: managing collaboratively by working
together to sustain loyal relationships with employees, customers, and investors; competing
collectively by standing as one worldwide brand and speaking with one voice; and operating
independently by focusing on individual networks. Management participates in a 360 degree
appraisal process.
4.
Key Employee Stock Ownership:
The following table shows the number of FedEx shares beneficially owned by key officers:
Name of Owner:
Frederick W. Smith
William J. Logue
David J. Bronczek
Robert B. Carter
T. Michael Glenn
Alan B. Graf, Jr.
David F. Rebholz
Christine P. Richards
Number of Shares:
19, 705,437
30,364
112,548
45,351
117,456
216,990
52,875
66,378
III. EXTERNAL ENVIRONMENT: Opportunities and Threats
(SWOT)
A.
Natural Physical Environment: Sustainability Issues
One of the major risk factors that FedEx faces is the uncertainty of the natural physical
environment. Their operations continuously reside in the environment of traveling each and
every day making about eight million deliveries. “FedEx is one of the largest express
transportation companies, delivering small packages throughout the United States as well as to
220 countries worldwide” (Datamonitor). Making these deliveries requires transportation
through all kinds of weather. At any time, adverse weather conditions or natural disasters, such
as earthquakes, tornadoes, volcanoes, or hurricanes can disrupt FedEx’s operations. Such events
can result in the disruption of shipment levels, electrical service, property damage, increased fuel
costs and lower revenues. Most forces have little to no notice of occurrence or indication of how
strong or weak the force will be. FedEx has to have continuous strategic plans in place to press
forward in every day operations. Each country’s physical environment forces vary from country
to country. And finally, FedEx is vulnerable to any and all worldwide shifts in ecosystems.
Another physical environment phenomenon that currently affects FedEx Corporation is the
global climate change and/or legal, regulatory, or market responses to such a change (Annual
Report). As a result of the impact of global warming, U.S. and international legislative and
regulatory efforts have been made to reduce greenhouse gas emissions. FedEx has to obey each
regulation adopted in any country that is serves. This in turn can cause increased fuel, energy or
capital costs. For example:
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i. In 2009, the European Commission approved the extension of the European Union
Emissions Trading Scheme. This concludes that in 2012, all FedEx planes are subject to
ETS requirements and will have to provide emission allowance in an amount equal to the
carbon dioxide emissions from flights each year (Annual Report). This adds another
substantial cost to FedEx which results in an increase to fuel and other energy costs.
ii. In the United States, the bill continues to be reviewed by the Senate. The bill pertains to
regulation of GHG emissions and some form of federal climate change legislation is
possible in the near future (Annual Report). Without knowing the scope and extensions of
any regulations concerning the global climate, FedEx has no certainty the effects on their
cost or operation structure.
FedEx has made successful efforts to improve their vehicles in order to adapt to different
physical environments in different countries. For example, they worked with Modec and
Navistar to develop a new all-electric commercial delivery truck. They are using the truck in
densely populated, moderate-climate urban areas like London and Los Angeles. As the
invention continues to improve, they plan on converting more vehicles.
B. Societal Environment
1.
Economic
“Coming through the toughest economic contraction since World War II, we stuck to our
strategy, to our long view of the future” (Annual Report). Every corporation and company in the
United States is being affected by the downturn of the economy. Some have made it, some are
struggling and some have failed. FedEx has come out on the better end. They have made
adjustments and big strides to keep their profit margin above ground. The Transportation
Industry brings hope and opportunity for FedEx. The industry is comprised of freight
transportation by road, rail air and marine. From year 2004 to 2008, this industry showed strong
growth. If this industry maintains its growth, FedEx will continue to have strong demand.
In the economy, one of FedEx’s weaknesses is its dependence on the U.S. market. In 2009, 73%
of its revenue was generated from the United States alone. To counteract that weakness, FedEx
has made strategic decisions including the use of state-of-the-art Boeing 777F aircraft on Asian
routes. This gives them a high competitive advantage as no other companies in the industry are
able to fly nonstop across the Pacific Ocean. This decision has created a new avenue of
opportunities for the FedEx Corporation in the Asian market. With the use of the 777F, they are
able to give customer later cutoffs to prepare shipments and the 777F flies farther on less fuel
and can carry almost 14,000 more pounds of freight. This in turn creates a big reduction in both
cost and emissions per unit transported. The global economy condition is significantly portrayed
in FedEx’s 2010 financial results. Over the course of the year, FedEx had a gradual increase in
revenue mostly due to the increase of international shipping. Their business levels are directly
connected to the purchase and production of goods as their primary service is to transport goods.
When the purchases of both individuals and businesses decline, FedEx transports fewer goods.
For the 2011 year, FedEx is in a strong position in comparison to competitors and other
companies in the current economical state.
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Going green has become a popular economic trend in the United States and Europe. FedEx has
made big strides in reducing the amount of greenhouse gas emissions. They have turned to an
energy alternative like many other companies. To reduce the amount of oil consumption in the
United States, FedEx has turned to electricity. It is a scalable energy source with almost
completely oil free fuel inputs. FedEx currently has the industry’s largest fleet of hybrid electric
package-delivery trucks and is continuing to expand their vehicles. FedEx is also greatly affected
by the availability and cost of fuel because they purchase huge quantities. To continue increased
efficiency in the aviation section of the industry, FedEx has been working on transitioning to
renewable fuel sources. Until then, they have been the most effective in mitigating the fuel cost
expenses.
FedEx also has to pay attention to foreign currency even though most of the transactions are
done in U.S. dollars. A recent fluctuation happened in 2010 impacting operations income.
Through calculations, this change will decrease the operating of $33 million for 2011.
2.
Technological
Technology is a crucial component to FedEx Corporation. The company relies heavily on
technology for all transportation and business operations and networks. Technological problems
can greatly impact FedEx’s operations and reputation. FedEx holds a very strong brand image
and in 2009 was named Fortune’s sixth best admired company all over the world. It is the eighth
year in a row that FedEx has been ranked in Fortune magazine’s top ten companies. Customers
rely on the effectiveness and sophistication of FedEx technology. Any kind of disruption can
impact FedEx directly and indirectly resulting in increased costs.
One of FedEx Corporation’s continuous goals is to identify and eliminate any redundancy and
complexity in their information technologies. They also strive towards making it possible for
people and businesses to connect with each other, no matter where they are in the world. “We
kept breaking technological ground to give our customers better service and to make our
operations more sustainable (Annual Report). In the recent months, they have launched FedEx
Electronic Trade Documents (ETD) which allows customers to submit custom documents
electronically which reduces paper usage; saving both FedEx and their customers time and
money.
To reduce the number of shipping channels, FedEx developed a global distribution commandand-control center called the FedEx International Direct Distribution Ocean Solutions. The
center consolidates FedEx operations and enables operations to run in a more effective and
efficient manner. Shipments are picked up at factories or container yards in Asia and Europe and
forwarded via ocean transport to the United States or Canada where they are processed through
FedEx Ground, FedEx SmartPost, FedEx Freight or FedEx Custom Critical for final delivery.
FedEx has also partnered with Canon/HP to bring new state-of-the-art printing and production
machines to all 1,800 U.S. FedEx Offices over the next few years. This will result in better
customer services to all FedEx Express and Ground Shipping locations.
3.
Political-Legal
In late 2010, a District Court in Indianapolis ordered FedEx to pay $66 million to the defunct
ATA Airlines (Federal Express). They shared a contract with the Department of Defense Air
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Mobility Command which transports military personnel and their families. ATA Airlines
claimed that FedEx terminated the contract causing ATA Airlines to cease operations. Any legal
proceedings are costly. FedEx will have to adjust due to this recent outcome.
An important legal and regulatory issue that has directly affected FedEx is the requirement for
independent contractors to be organized as corporations registered and in good standing under
state law. FedEx must treat the independent contractors providing services to the organization
under the same operating agreement with FedEx Ground as their employees (Annual Report).
Most of the contractors already meet these requirements and FedEx is notifying new contractors
ahead of time. FedEx also implemented a model stating the contractor is responsible for the
pickup and delivery operations in the state due to New Hampshire and Maryland state
regulations. This model has proved to be useful and FedEx is switching other states to follow the
ISP model.
4.
Sociocultural
The sociocultural aspects of the environment play a continuous part in FedEx’s strategy in both
the operations and marketing divisions. Two of the biggest aspects are technology and the
environmental movement. Technology has made a huge leap in the last few years, most of the
younger generations are accustomed to all the technology, however many of the older
generations (like the baby boom generation) are new to all the developments. They are oldfashioned. FedEx must be able to serve and accommodate all generation’s needs and wants. The
second factor sociocultural aspect affecting FedEx is the environment. People have become more
concerned with current environmental situation and are moving towards greener products and
services to help preserve the environment. In response to this issue, FedEx strives to create more
environmentally friendly developments relating to fuel, materials and noise. They are committed
to making every effort to reduce their impact on the environment.
C. Task Environment
1.
Threat of New Entrants (Low)
The entry of new competitors in the shipping and freight industry is low. The nature of the
industry creates high capital expenses to operate. Existing companies have created a significant
barrier to entry in regards to the amount of daily production and distribution. FedEx alone creates
a huge barrier with their strong brand image and the diverse services they offer. In the current
economy, it is very unlikely for new companies to enter the market.
2.
Bargaining Power of Buyers (Medium)
The bargaining power of buyers in this industry is medium, but it continues to grow as FedEx
expands to Asia and other countries. Another factor that contributes to the bargaining power of
buyers is the environmental movement. Buyers may prefer to purchase or use services from
companies that are dedicated to operating in a “greener” environment. Also, with the current
economy, customers are looking for the best deals and/or prices. Convenience is also a major
decision factor in the mind of the buyer. They want a one-stop shop to fill all of their needs and
wants. FedEx must continue to adapt to these needs to retain their customers.
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3.
Threat of Substitute Products and Services (High)
The threat of substitution is a very high force for FedEx Corporation. The major cause of this
force is the growing popularity of the internet. In a short time, email has become the popular way
of communication decreasing the usage of postal mail substantially. Technological advances
including text messaging and wireless broadband have made it possible for customers to receive
mail faster via internet. These time and money saving advancements have reduced demand for
FedEx services and lowered operating income. FedEx has addressed this problem by offering
customers the ability to transfer electronic documents through the FedEx website. This service is
available in 71 countries and will continue to grow in the near future.
4.
Bargaining Power of Suppliers (High)
Due to the inherent capital costs of starting up in the shipping and freight industry, the
bargaining power of suppliers is high. For this reasons why this force is in the high category is
the availability to serve many different customers in the same and other industries. The biggest
advantage for FedEx is their large fleets and ability to negotiate volume discounts for fuel.
5.
Rivalry Among Competing Firms (High)
Even though the transportation industry is huge, there is still intense competition especially in
the LTL freight industry. This is high force among the others in the Porter’s Five Forces. One of
the biggest factors is the sensitivity to price and service; especially in the current economy where
there is little to no growth. FedEx has a very broad competition as they compete in a local,
regional and international level. Two major factors play a part in FedEx’s current and future
standings among competitors, the first one being price and the second being the portfolio of
services.
Any change in price can limit FedEx’s ability to maintain or increase pricing. This includes the
rise and lowering of fuel costs. Fuel costs are a major part of the competition. FedEx is
continuously mitigating the impact of increased fuel costs. As the cost is uncontrollable and
unpredictable, they want to take preventive measures.
6.
a)
Relative Power of Unions, Governments, Special Interest Groups, Etc.
(Medium)
Labor Unions
A continuous risk factor for FedEx is that of labor organizations advocating company employees
to form labor unions and the potential changes in labor laws. The rate of force is low to medium.
FedEx tries to maintain good relationships with all employees to prevent the organization of
employees against the company. A current provision in process is the FAA Reauthorization Act,
which will remove most FedEx Express employees from the purview of the Railroad Labor Act
of 1926. If the bill passes by the Congress and the President, it could expose FedEx customers to
service disruptions, which the bill is designed to prevent, including the timely flow of time-
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sensitive shipments through the global network. This could threaten FedEx’s ability to provide
low cost shipping options, ready access, and quality service.
Another proposed Act is called the Employee Free Choice Act also known as the “card-check
legislation”. This act would result in the elimination of the employee’s right to a secret ballot
vote in union elections. Another change by the government that could affect FedEx independent
contractors in the future is changes to employee classifications. Independent contractors account
for 39% of all FedEx Ground pickup-and-delivery contractors.
A negotiation between the pilot union and FedEx Express is also underway. FedEx plans on
continuing to operate under the current agreement, but there is no guarantee of the negotiation’s
outcome. If an agreement cannot be made, FedEx may be subject to a strike that could negatively
impact FedEx aviation operations and result in the loss of customers.
b)
Government
The risk of Government on the task environment is medium to high. Security differs in each
country. In the recent years, there has been increase of security requirements which impose
considerable costs to every international company, especially due to threats of terrorism. FedEx
must continue to obey and follow each security law for every country. For FedEx, this means the
increase of both operational and material costs.
In October 2010, FedEx put the following restrictions in place on cargo shipments due to
regulatory directives:
i. In the country of Yemen, all inbound and outbound shipments have been suspended until
further notice.
ii. In the United Kingdom, toner cartridges are no longer allowed to be shipped in quantities
larger than 500 grams until further notice.
FedEx has a team that monitors and keeps in touch with all law enforcements to make sure they
are implementing procedures to contend with regulations.
Another government agency that can impact FedEx aviation is the Department of Transportation.
The bilateral agreement between the United States and foreign governments is a key factor in
FedEx’s success. Permissions must be provided by foreign governments to provide certain
flights and/or services. Without it, the company will ultimately suffer in the international market.
D.A. Summary of External Factors
External Factors currently play a major role in affecting and influencing the FedEx Corporation,
and will continue to do in the years to come. The factors affect FedEx directly and indirectly and
present themselves as opportunities or threats. Table 1 illustrates and analyzes the opportunities
and threats that have FedEx faces. Each factor is weighted from 1 (most important) to 0 (not
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important) and then rated from 5 (outstanding) to 1 (poor) based on the company’s response to
that factor. The weight and rating are multiplied by each other to generate a weighted score. An
average firm in an industry has a total weighted score of 3.0. The rating is a judgment regarding
how well the company is dealing with each specific internal factor, with 1.0 being poor and 5.0
being outstanding (Wheelen and Hunger). FedEx has a total weighted score of 3.12 with is
slightly above average.
FedEx has a huge scale of operations that is segmented into divisions or operating companies.
Each operating company is affected by the external environment daily. Through any physical
conditions, FedEx must continue to operation to serve customers around the world. They have
multiple opportunities including the expansion of their services internationally to other countries,
reducing operation costs by turning to alternative energy and fuel sources and technology
advancements including continuation of ETD to more countries.
The biggest threat is the current economical situation throughout the United States and other
countries. With 73% of their revenue coming from the United States, it could have effect on their
corporation if sales do not grow substantially. Rivalry is also a major threat due to the sensitivity
of price and service. With strong brand image and continuous developments, FedEx will remain
as one of the leading companies in the world.
EXTERNAL FACTOR ANALYSIS SUMMARY (EFAS Table): FEDEX
External Factors
Weight
Opportunities
International Expansion
Outsourcing Trends by Customers
Technology Advancements
Threats
Current Economic Situation
Rivalry Among Competitors
Environment Regulations/due
to Global Warming
Rising Fuel Costs
Total Scores
Table 1 – EFAS Table
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Weighted
Rating
Score Comments
0.10
0.15
0.20
2.50
3.75
4.00
0.25
0.56
0.80
Presence Well Established
Increase in Services
In Progress
0.15
0.15
0.10
3.00
3.20
2.75
0.45
0.48
0.28
0.00
0.30
Slowing improving
Questionable
0.15
1.00
2.00
3.12
Well Positioned
Prices are volatile
IV.
Internal Environment: Strengths and Weaknesses (SWOT)
A.
Corporate Structure
FedEx Corporation provides a broad portfolio of transportation, e-commerce and business
services. FedEx Corporation is a holding company for FedEx Express, FedEx Ground, FedEx
Freight, and FedEx Services. The organization is structured into operating companies that each
operated independently to focus on servicing the distinct needs of their customers.
FedEx Express
FedEx Express is the world’s largest express transportation company, providing delivery to
every US address and to more than 220 countries and territories. FedEx Express uses a global
air-and-ground network to speed deliver time-sensitive shipments, usually in one to two business
days. Delivery times are guaranteed. FedEx Express can be further segmented into three distinct
divisions: US, International and Freight. FedEx Express also encompasses subsidiaries FedEx
Trade Networks and FedEx Supply Chain. (FedEx Express)
FedEx Trade Networks aims to simplify international shipping by providing flexible end-to-end
services. Customs brokerage, global cargo distribution and trade facilitation solutions are
available to customers of all sizes through the Transport and Brokerage division. FedEx Trade
services can be utilized individually or as a package. Additionally, the Trade Services division
provides Trade and Customs Advisory Services and global duty and tax information from
WorldTariff. (FedEx Trade Networks)
FedEx Supply Chain serves to bring the right elements together to turn supply chain management
into a competitive strategy by customizing solutions for customers around the world. The
specialty services provided are FedEx Critical Inventory Logistics, Fulfillment Services, FedEx
Transportation Management and FedEx Healthcare Shared Network. (FedEx Supply Chain)
FedEx Ground
FedEx Ground specializes in cost-effective, small-package shipping.
They offer dependable
business-to-business delivery or convenient residential service. FedEx Ground can be further
segmented into the FedEx Ground US, FedEx Ground International and FedEx Home Delivery
divisions. FedEx Ground also encompasses subsidiary Fed Ex SmartPost. (FedEx Ground)
FedEx SmartPost is a leading national small-package consolidator, which specializes in the
delivery of low-weight, less time sensitive business to consumer packages, using the US Postal
Service for final delivery to residences. Catalog companies and e-tailers make up the customer
base for SmartPost. (FedEx SmartPost)
FedEx Freight
FedEx Freight provides full-state coverage throughout the United States, international service to
Canada, Mexico, Puerto Rico, Central and South America, Europe and Asia. FedEx Freight
focuses on shipments 150 lbs and over. FedEx Freight also encompasses subsidiary Fed Ex
Custom Critical. (FedEx Freight)
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Fed Ex Custom Critical has both North America and International divisions. The North America
division provides exclusive use, door-to-door transportation service throughout the U.S., Canada
and Mexico. This service is available 24 hours a day, 365 days per year-for same day shipping
or overnight delivery of critical freight. The Custom Critical Air Expedite offers an array of
solutions for international shipments, including exclusive-use charters and time-specific
airfreight services. Sensitive shipments are transported in temperature-controlled cargo
containers.
FedEx Critical Passport Auto Transport (a subsidiary of FedEx Custom Critical) provides doorto-door vehicle transport throughout the U.S. The company has custom-designed, fully enclosed
air-ride trailers and services are primarily for vehicles of high value. (FedEx Custom Critical)
FedEx Services
FedEx Services was formed to bring together sales, marketing customer services, public relations
and IT resources. (SRI Index) FedEx Services also encompasses FedEx Office and Fed Ex
Customer Information Services.
FedEx Office provides access-points to printing and shipping expertise. Services include copying
and digital printing, professional finishing, document creation, direct mail, signs and graphics,
Internet access, computer rental, FedEx Express and FedEx Ground shipping. The company also
offers an online printing solution. Services are located in the US, Canada, China, Japan, South
Korea, Kuwait, Lebanon, and the United Arab Emirates. FedEx Office also encompasses the
subsidiary FedEx Customer Information Services. (FedEx Office)
FedEx Customer Information Services’ mission is to align customer contact centers, worldwide
revenue operations, claims, trace and package engineering within FedEx’s professional services
company. (FedEx Customer Information Services)
FedEx Corporation and the operating companies that make up the conglomerate are functionally
organized and are each expected to serve the customers of each function to a very high customer
service standard. As such, the sales and marketing activities, as well as the information systems
that support the extensive automation of the package delivery services, are functions that are
coordinated across the operating companies. The use of advanced information systems connects
all the FedEx companies and makes it convenient for customers to use the fill range of FedEx
Services via fedex.com.
FedEx Corporation’s strategy is “compete collectively, operate independently and manage
collaboratively”. Therefore, the decision-making authority depends on the type of decision being
made. The parent holding company, FedEx Corporation provides the strategic direction and
consolidated financial reporting. (10-K) Therefore, the “compete collectively” and “manage
collaboratively” aspects of the strategy attribute decision making to the centralized management
group in the FedEx Corporation holding company. Such decision-making would be attributed to
aspects of the business that relate to capital investment, expansion of delivery, information
technology and retail networks, and service additions or enhancements on achieving the highest
overall long-term return on capital for the business as a whole. These decisions lie with the
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management of FedEx Corporation and are structured to protect the long-term return on capital
for the business as a whole. For each FedEx company, the focus is on making appropriate
investments in the technology and assets necessary to optimize the long-term earnings
performance and cash flow. (10-K)
The “operate independently” section of the strategy focuses on the operating companies and the
need to decentralize decision-making authority to the operating companies themselves when it
comes to decisions regarding operations, cost structure and culture. (10-K) The rational for
decentralizing the decision-making authority for these types of decisions is that each company
has an expertise in regards to the market sector and the unique customer needs of their particular
market sector.
The FedEx conglomerate’s organization is based on a combination of function, projects and
geography. Because the organization is a service company and has a vast variety of types of
services and global locations, the company is segmented into various operating companies. The
companies are organized based on the type of service (express, freight, ground, office, etc.) that
they provide.
Within each subsequent operating company, organizational divisions have been established
which are based on either geographic regions or in a few cases, different projects or products
designed to enhance consumer services and their business needs.
The strategic philosophy to “compete collectively, operate independently and manage
collaboratively” provides a clear foundation in identifying FedEx’s functional structure. The
organization of the operating companies into service areas for specific customer needs makes it
easy for employees within the organization to understand the structure. Additionally, the
fedex.com website links all services and provides explicit information as to the company
structure.
FedEx’s structure follows the mission, objectives and strategies that have been established. The
mission states that focused operating companies will meet expectations and requirements of
customers in the highest quality manner possible in each market segment. The structure follows
the statement as each operating company (and the divisions within them) is segmented to provide
service(s) for a particular customer need and/or function. The structure also supports the
“compete collectively, operate independently and manage collaboratively” strategy to ensure that
customers distinct needs are by the segmentation of services. Additionally, by structuring the
holding company, FedEx Corporation, to manage the technology infrastructure and strategic
direction, the organization has derived a way to tie the segmented operating companies together
via the internet site and allow customers to utilize multiple services from various operating
companies with ease. The result is collective competition that provides for superior customer
service and empowered employees.
FedEx and UPS both started with centralized operations models which allowed them to spread
their costs across networks and pull funds from corporate headquarters. Both companies have a
strong revenue base domestically, which they have utilized to finance global expansions.
Additionally, both advance in the market through a steady, long-term strategy approach. Their
strategies include continued acquisitions to further strengthen and expand their dominant
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domestic market positions to other areas across the world. Both companies are well funded and
have been able to preserve their independence.
DHL and TNT both began with highly decentralized and entrepreneurial models which gave
them an initial advantage for localized, personal customer service. However, this eventually
proved to be an obstacle in terms of long term strategic planning. The models used by DHL and
TNT were initially effective, but in the long run they became vulnerable to takeover. Both
companies have been acquired by European postal authorities and are now undergoing a process
of increasing centralization (Latin).
B.
Corporate Culture
FedEx believes that the greatest company asset is the “absolutely, positively” spirit of the men
and women that make FedEx what it is. The corporation believes that its workplace environment
and culture drive the operational success essential to creating a superior customer experience
which builds customer loyalty. For this reason, FedEx maintains a high-performance culture.
(FedEx Culture of Service)
FedEx was an “early adopter” of the People-Service-Profit business model (Exhibit 1). FedEx
employed the principles underlying the model well before it was formally articulated. From the
outset, Fred Smith emphasized that employees need to be treated with respect and dignity, which
is critical in a service industry where the employees provide the service. Fred Smith set the tone
for the Corporate Culture by placing a high priority on employee training, incentives and
empowerment. (SRI)
PEOPLE-SERVICE-PROFIT CHAIN RELATIONSHIPS
Retaining customer loyalty is an invaluable asset to companies. Repeat purchases
by satisfied customers, when added to word-of-mouth referrals, provide an
enormous impact on profitability, competitve advantage, and growth.
✓ Employee satisfaction is created by an internal "enabling environment" and
and high quality support systems.
✓ Loyal and productive employees creates value and increase customer
satisfaction through services provided.
✓ Customer satisfaction leads directly to customer loyalty.
✓ Customer loyalty generates greater profits, competitiveness and
growth.
Employee
Enhanced Customer
Greater Customer
Higher Profits
Satisfaction
Service/Satisfaction
Loyalty
and Growth
Exhibit 1- People-Service-Profit Chain Relationships Model (SRI)
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FedEx Corporation (and all affiliated operating companies) has a combined workforce of more
than 290,000 team members, who service more than 220 countries and territories. To reinforce
the importance and value that FedEx attributes to its workforce, many employee recognition
programs have been implemented to celebrate the accomplishments of employees who go above
and beyond. The Recognition Programs are listed on the FedEx Recognition Programs webpage:
•
•
•
•
•
The Five Star: an annual award that recognizes team members who have enhanced
service and profitability and exemplified the spirit of teamwork. Managers nominate
their team members. This is the highest honor at FedEx.
Bravo Zulu: derived from the U.S. navy signal meaning “well done.” Is distributed to
individuals within FedEx for outstanding performance beyond normal job expectations.
Managers reward employees for outstanding efforts and achievements on the spot.
Rewards may include “quick cash” bonuses, theater tickets, dinner gift certificates and
other gifts of similar value.
Purple Promise: Couriers, pilots, meteorologists, customer service agents and package
handlers are just a few of the team members who must execute flawlessly to deliver the
award-winning service customers expect. Team members who consistently deliver
superior customer service and make each and every FedEx experience outstanding are
eligible for this annual award.
The Humanitarian Award: This annual award recognizes employees who reach out to
others in times of need, exhibiting behavior that goes above and beyond basic community
responsibility.
CEO Safety Award: Each year at FedEx Express, individuals are honored for their
contribution to safety through this award.
These programs help reinforce the high-performance culture at FedEx, as employees who know
they are appreciated and recognized for hard work and great service are more motivated meet the
high-performance expectations and exemplify the mission and culture of FedEx.
FedEx prides itself on a diverse workforce, supplier base and supporting culture that embraces
diversity, which is essential to the corporation’s continued success in today’s ever-changing
global marketplace. More than 40 percent of the U.S. workforce and 27 percent the management
team are minorities. FedEx embraces a diverse workforce and has six affinity groups that
include African American, Asian, Hispanic, cancer-support, women, and lesbian, gay and
transgender (LGBT) employee networks. The networks celebrate diversity and promote cultural
education. Additionally, Fed Ex maintains a Corporate Diversity Council that focuses on a
global culture of diversity and inclusiveness. The council works to ensure greater employee
awareness and positive perception of FedEx’s diversity commitment, and supports multicultural
programs within the company and the communities that it serves. (FedEx Culture) FedEx
believes that the organization should be as diverse as the world that they serve. FedEx’s
commitment and support to diversity is a contributor to inspiring the workforce to excel at
servicing the customers, which supports the strategy and mission of the entity.
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FedEx’s culture is also geared toward sustainability. FedEx’s global citizen focus states: FedEx
is committed to sustainability connecting the world and enhancing the long-term value of the
company for our shareowners, for the communities and businesses that rely on our services and
for our team members. (Global Citizen Update) FedEx created the EarthSmart program to
encourage innovation that makes the business more sustainable, both economically and
environmentally. The EarthSmart program focuses on the categories of business, culture and
community. The programs put in place to represent these categories are EarthSmart Solutions,
EarrhSmart @ Work and EarthSmart Outreach. (Global Citizen Update)
A yearly Global Citizen Update report is published to share the EarthSmart programs and track
the progress of the FedEx’s sustainability objectives and goals. The 2009 report included many
noteworthy objectives and accomplishments.
•
•
•
•
•
FedEx become the first US based company in the shipping industry to add the Boeing
777F to its aircraft fleet. The 777F enhances their ability to move more freight to more
distant markets while reducing emissions by 18%.
FedEx is replacing the Boeing 727 with the 757 planes, which will cut greenhouse
emissions and reduce fuel consumption by 47%. The plan is to have at least 15 777Fs by
2014.
FedEx is expanding from three existing solar electric systems at FedEx facilities to five,
which will reduce the annual CO2 emissions by a projected 3,918 metric tons. That’s
equivalent to 440,754 gallons of gasoline never burned or 100,469 tree seedlings growing
for 10 years.
FedEx is a founding member of the American Red Cross Annual Disaster Giving
Program, and currently provides $1,200,000 annually in cash and in-kind transportation
support.
Each year, FedEx sets aside space for 4,000,000 pounds of charitable shipping.
FedEx commitments to its employees, diversity and environmental all contribute to the high
performance culture that FedEx has sought to create. The programs and accomplishments all
support the mission and strategies set forth in the strategic plan to maintain good relationships
with their workforce, customers, and investors alike.
C.
Corporate Resources
1.
Marketing
Fed Ex currently has a large and vast marketing campaign that they have been following for
some time. Their current strategy is focused on their brand. Most of their current marketing
campaign is centered around sports. Fed Ex chose to focus on sports because speed, teamwork,
and precision are what they have in common with championship caliber sports sponsorships.
They have several sports related marketing campaigns currently ongoing. The main ones are Fed
Ex and the NFL which focuses on advertising throughout televised NFL games. Fed Ex Field,
which is the name of the stadium which the Washington Redskins play their home football
games at. The Fed Ex cup which is a season long points like golfing competition. This type of
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marketing is especially important because they are season long marketing ventures that
continually hit different target markets in different market segments. FedEx also has a NASCAR
team that they market through. This is also an important marketing segment because in
NASCAR the entire team and vehicle are decaled in sponsorships, such as Fed Ex. It is also
worth noting that Fed Ex’s driver is in contention for the championship which only adds value to
this marketing avenue. Fed Ex strives to market their brand vigorously. They run a variety of
commercials, typically coinciding with sporting events.
In terms of market share, Fed Ex dominates the market for domestic shipping. They currently
hold a market share of 49% by volume. They have been successful in their marketing strategies
by choosing to market through sports because sports attract such a wide array of target markets.
One of Fed Ex’s most recent marketing campaigns has been Fed Ex Office, which is an on-site in
store shipping and printing solutions service center. They use various advertising campaigns on
television, radio, and the internet to reach their target markets. They also were able to take
advantage of existing customers because Fed Ex Office is formerly, Kinkos, a well known
established printing solutions company that Fed Ex acquired.
2.
Finance
Fed Ex’s current long term financial objectives clearly stated and are consistent with their
mission and strategy. These objectives are to grow revenue by 10% per year, achieve 10% or
greater operating margins, increases EPS by 10%-15% per year, increase cash flow, and increase
returns. Their long term financial strategies are to grow core package business, grow
internationally, grow our supply chain capabilities, grow through e-commerce & technology, and
grow through new services & alliances.
The company is performing well considering the current economic conditions and in comparison
to competitors. They cut several billion dollars in costs over the last few years, and in 2010 they
began restoring compensation programs and 401(k) matching contributions. In terms of analysis
and looking at the numbers, revenue was at $34.7 billion, down only 2% from 2009. Their EPS
were up over 10%, in fact they were more than ten times higher than their EPS in 2009. They
improved their operating margin from 2% to 5%, but are still 5% away from achieving their
objective of operating at a 10% or great margin. Net income was at $1.2 billion and their long
term debt was decreased by $600 million, a 25% decrease in long term debt. Their cash and cash
equivalents took a substantial hit, decreasing from $2.3 billion to $1.9 billion; however, $1.9
billion is still a considerable amount of cash to have on hand. Their current ratio is around 1.55
which is a good indicator that they are maintaining their financial position comfortably above
where they need to be.
Having these various financial statistics offer a positive reassurance to investors. It shows that
with a market share of 49% and even during tough economic times, Fed Ex is still profitable and
still committed to their shareowners. This does several things for the company. First, it
encourages more growth and more capitalization by building investor confidence. Second, it
provides stability for the company, its employees, and shareowners by providing security in
knowing that if all of their debt was called in, they could pay it off without having to declare for
bankruptcy. Third, it provides a huge competitive advantage over their competitors because it
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allows them to feel content with slowing down and not being as aggressive in this struggling
economy without feeling pressure. Competitors not only need to survive during this time, but
need to make up ground on Fed Ex and gain more of the market share while Fed Ex could suffice
on merely surviving.
.
The current economic state greatly affects FedEx. Table 2 below represents the consolidated for
results of operations for FedEx for fiscal years 2010, 2009, and 2008. FedEx’s fiscal year ends
on the 31st of May. The financial information illustrated in the table shows how FedEx’s
financial position is directly related to the economy, as in 2009 the economy came to a grinding
halt and began to recover in 2010.
FEDEX SUMMARY OPERATING RESULTS
(Fiscal Years ended May 31)
Revenues
Operating income
Operating Margin
Net Income
Diluted earnings per share
2010
2009
2008
$34,734 $35,497 $37,953
1998
747
2,075
5.80% 2.10%
5.50%
$ 1,184 $ 98 $ 1,125
$ 3.76 $ 0.31 $ 3.60
Table-2
3.
Research and Development (R&D)
In 1978, Founder Fred Smith was quoted saying “The information about the package is as
important as the package itself.” Fred Smith’s underlying idea in his famous quote became the
inspiration for FedEx’s strategic plan and practices towards innovation. FedEx’s is a service
oriented company. In today’s New Economy getting a package from point A to point B in a
promised time frame, no longer creates value for FedEx’s global customer base, customer’s need
to access information about their packages in real time. FedEx innovations have enabled this to
happen. Innovation is a top priority for the company.
FedEx’s commitment to innovation propels the development of ideas, products and services that
empower their customer to grow their businesses around the world. (FedEx Innovation) Seeking
continued information technology innovation to add value to customers, FedEx invests about 1.5
billion a year, or over seven % of its revenue, in its information and telecommunications
systems. (SRI) Nationwide, the air transportation industry only invests about 6% of its revenues
in technology, while the motor freight, transportation and warehousing industry invests even
less, at about 1.5%. (SRI)
To continue and support FedEx’s pursuit and development of new technologies, to provide
innovative solutions and services for customers, FedEx has established two innovative spaces:
FedEx Innovation Labs (located in downtown Memphis away from the headquarters) and The
FedEx Institute of Technology at the University of Memphis. (FedEx Innovation) These
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facilities are designed to create an atmosphere of collaborative thinking around critical
technologies such as advanced optics for scanning, robotics, pervasive computing, social
networking and more. (Fed Ex Innovation) FedEx Innovations have been revolutionary in their
impact on the industry and for FedEx customers.
FedEx’s strategic customer service focus led to the development of their advanced information
systems and fast-cycle logistics, which makes mass customization a possibility for its customers.
(SRI) FedEx has played a vital role in revolutionizing business processes in the last two
decades. The intellectual capital that FedEx has provided (particularly through information
technologies has resulted in FedEx playing a vital role in revolutionizing business processes in
the last two decades. (SRI) FedEx’s technological advances enable customers to access
information in real time as a result of FedEx’s adoption of barcode scanning technology.
4.
Operations and Logistics
FedEx Corporation implements its service objectives, strategies, policies and programs to in its
operations to ensure that its services adhere to their high standards of meeting and exceeding
customer requirements in a high quality manner appropriate to each market segment. The
desired result is developing rewarding relationships with employees, partners, and suppliers,
which leads to customer satisfaction. The company follows the People-Service-Profit model (it
followed this philosophy before it was officially articulated as a business model). The strategies
and expectations are clearly identified in FedEx’s business plan and operating policies.
FedEx’s main strategy to “compete collectively, operate independently, manage collaboratively”
is the basis for everyday operations. The “compete collectively” portion behind the strategic
plan is evident in the way in which FedEx has integrated its customer service system and
www.fedex.com website. Customers are able to access any and all of the operating companies to
manage whatever single service or combination of services that they have chosen to utilize. The
“operate independently” portion of strategy is the basis for the organization and is the premise
for the way in which the various operating companies have been structured and operate day-today. This functional organizational structure has allotted FedEx to provide flexibility in sizing
the operating companies to align with varying macro-economic conditions and customer demand
for the market segments in which they operate. (Annual Report) FedEx follows the “manage
collaboratively” portion of the strategic plan weighing decisions concerning capital investments,
information technology and retail networks, service additions and enhancements to ensure that
they are in the best interest of the entity as a whole.
FedEx has structured the organization into the operating companies that focus on a particular
area or service. The operating companies are also segmented into divisions, many by
geographical locations. By doing so, FedEx can adapt to the various culture and rules within the
geographical regions that they serve.
FedEx has adapted the way it operates to help reduce its environmental footprint. They have
added the Boeing 777F to their aircraft fleet which will enhance their ability to move more
freight to more distant markets while reducing emissions by 18%. They plan to have 15 777Fs
by 2014, and have ordered another for delivery by 2019. They have also begun replacing their
Boeing 727 aircraft with 757 planes, which will cut greenhouse gas emissions and reduce fuel
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consumption by 47 percent. In 2000 FedEx began exploring ways to put hybrid vehicles on the
road. They currently have the industry’s largest fleet of hybrid electric package delivery trucks.
FedEx has also started utilizing solar panels at their facilities to reduce their energy usage.
FedEx (consolidated information or all FedEx Companies) has a workforce of more than 280,000
members throughout the world. The organization services more than 220 countries and
territories. The average daily volume for FedEx is more than 8 million shipments for express,
ground, freight, and expedited delivery services.
FedEx has an extensive network of operating facilities around the world. Based on information
provided at www.fedex.com operating capabilities for the operating companies and their
subsidiaries is outlined below:
FedEx Express
• Headquarters:
o Worldwide: Memphis, Tennessee
o Asia Pacific: Hong Kong, China
o Canada: Toronto, Ontario
o Europe/Middle East/Africa: Brussels, Belgium
o Latin America: Miami, Florida
• Average Daily Volume of approximately 3.5 million packages and 11 million pounds of
freight
• Workforce of more than 140,000 team members worldwide
• Serves more than 220 countries and territories
• Air Operations include more than 375 airports worldwide
• Air Fleet consists of 664 aircraft
• Delivery Fleet includes approximately 41,000 motorized vehicles
• Operating facilities consist of 1,057 stations, of which 676 are located in the U.S. and 381
outside of the U.S., and 10 air express hubs
o Asia Pacific: Guangzhou, China
o Canada: Toronto, Ontario
o Europe/Middle East/Africa: Paris, France
o Latin America-Caribbean: Miami, Florida
o United States: Anchorage, Alaska; Fort Worth, Texas; Indianapolis, Indiana;
Memphis, Tennessee (SuperHub); Newark, New Jersey; Oakland, California
• Dropoff Locations consist of:
o 708 FedEx World Service Centers
o 1,803 FedEx Office locations
o 6,824 FedEx Authorized ShipCenters® and Alliance Partners
o 43,504 FedEx Drop Boxes (including 4,974 US Postal Service locations)
FedEx Supply Chain
•
•
•
Headquarters is located in Memphis, Tennessee
Service Area is in North America
Workforce of more than 800 team members
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•
•
Ground Fleet consists of approximately 400 motorized vehicles
Warehousing consists of approximately 40 warehouses with over 4 million square feet
FedEx Trade Networks
• Headquarters is located in Memphis, Tennessee
• Service Area is worldwide from more than 330 locations
• Workforce of more than 3,500 employees
FedEx Ground
• Headquarters is located in Pittsburgh, Pennsylvania
• Workforce of more than 65,000 team members
• Average daily volume of more than 3.5 million packages
• Service Area is throughout the United States and Canada
• Ground Fleet consists of more than 22,000 motorized vehicles
• Operating facilities consist of:
o 32 ground hubs and over 500 pickup/delivery terminals
o 25 FedEx SmartPost distribution centers
• Dropoff locations consist of:
o 679 FedEx World Service Centers
o 1,784 FedEx Office locations
o 6,735 FedEx Authorized ShipCenters® and Alliance Partners
FedEx Smart Post
• Headquarters is located in New Berlin, Wisconsin
• Workforce of more than 4,500 employees
• Average daily volume of more than 1.1 million packages
• Service Area is throughout the United States and Puerto Rico, plus APO/FPO addresses
• Operating facilities consist of 25 distribution centers
FedEx Freight
•
•
•
•
•
•
Headquarters is located in Memphis, Tennessee
Workforce of more than 34,000 employees
Average daily volume consists of more than 90,000 shipments
Service area consists of:
o Full-state coverage throughout the entire United States
o International service to Canada
o Mexico
o Puerto Rico
o Central and South America
o The Caribbean
o Asia
Ground fleet consist of more than 75,000 pieces of equipment, including 20,000 tractors
Operating facilities consist of approximately 470 service centers
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FedEx Custom Critical
• Headquarters is located in Green, Ohio
• Average daily volume of approximately 700 shipments
• Service Area is throughout North America and internationally
• Service Hours have 24/7 availability (nights, weekends and holidays are at no extra
charge)
• Workforce of more than 1,300 team members
• Ground Fleet provides exclusive use of more than 1,300 vehicles in five sizes
• Air Fleet consists of access to virtually every on-demand aircraft in North America
FedEx Services
• Headquarters is located in Memphis, Tennessee
• Workforce of more than 12,500 employees
FedEx Office
• Headquarters is located in Dallas, Texas
• Workforce of approximately 18,000 employees worldwide
• Service Area consists of center in eight countries
• Operating facilities consist of nearly 2000
Customer Information Services
• Headquarters is located in Memphis, Tennessee
• Workforce of more than 4,500 employees
An additional essential operating activity of the FedEx organization is FedEx’s website
www.fedex.com. The website provides customers access to services for any of the FedEx
operating companies. Customers are able to track delivery status in real time of any shipment or
service that they have acquired from FedEx. Additionally, customers are able to place shipping
orders, schedule pickups, request customized services, access customer service representatives,
access billing and make payments on their accounts. The website also allows customers to access
information to any one of the operating companies (or a combination of). Customers truly have
access to unlimited information through this portal twenty-four hours a day, seven day a week,
365 days a year. This website provides a lifeline for the company and its customers.
All FedEx operating companies are essential in meeting customer needs. FedEx offers
customers many shipping methods allowing the customer to find the service that best suits their
needs for delivery times and cost. FedEx Express is the top ranked express delivery company in
the industry, however for the FedEx organization this operating company is the middle of the
pact in operations margins. Exhibit 2 displays the top, middle and bottom positions of the FedEx
operating companies in regard to operating margins. FedEx Ground has the highest percentage,
while FedEx Freight has the lowest of the operating companies.
Exhibit 2 reinforces the affects that the economy has on FedEx business. 2009 produced a stalled
economy and FedEx’s operating margin was directly affected. In 2010, the economy started a
slow rebound and FedEx’s increasing operating margins show a direct correlation to economic
improvements.
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Exhibit 2-FedEx Operating Margins FY2008-FY2010
OPERATING MARGINS
FedEx Express
FedEx Ground
FedEx Freight
FedEx Corp*
2010
5.20%
13.80%
-3.50%
5.80%
2009
3.60%
11.50%
-1.00%
2.10%
2008
7.80%
10.90%
6.70%
5.50%
*Consolidated across all FedEx Segments
FedEx faces many risks in its operations. In addition to the state of the economy, there are many
factors that can and do affect operations and the bottom line. As identified in the FedEx 2010
Annual Report, a few of the more notable and more costly threats that can adversely affect
operations and profits are (Annual Report):
•
•
•
•
•
•
•
•
•
•
•
FedEx’s businesses depend on their strong reputation and the value of the FedEx Brand
FedEx is directly affected by the state of the U.S. economy
Labor organizations attempt to organize groups of FedEx’s employees from time to time,
and potential changes in labor law make it easier for them to do so
Adverse weather conditions or natural disasters
Widespread outbreak of an illness or any public health crisis
FedEx relies heavy on technology to operate their transportation and business networks,
and any disruption on the technology infrastructure or the Internet could harm operations
and FedEx’s reputation among customers
Impacts on the business resulting from new domestic or international government laws
and regulations
Transportation businesses may be impacted by the price and availability of fuel
FedEx Ground relies on owner-operators to conduct its linehaul and pickup-and-delivery
operations, and the status of owner-operators as independent contractors, rather than
employees, is being challenged
Increased security requirements could impose substantial costs for FedEx, especially for
FedEx Express
The regulatory environment for global aviation rights may impact air operations
FedEx has been a pioneer whose ideas and innovations have been widely copied by other
companies. (SRI) FedEx’s quest to provide top-notch customer service has prompted them to
increase delivery options to customers. Such examples are in 1981, FedEx launched its Priority
Overnight services. In less than a year it achieved a volume of over 27,000 pieces. Since that
time, FedEx has continued to expand its delivery option to meet customer demand across a full
spectrum of needs and service levels. FedEx was the first in the industry to offer new option and
was ahead of its main rival, UPS, by one to seven years in their offering of similar services.
FedEx has been a leader in innovation and through its mission to meet the distinct needs of
customers has pushed itself to create new ways to service them. Although FedEx’s customers
are from all walks of life, the most substantial portion of their customer base comes from
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businesses. FedEx has incorporated customer needs brought forth by the New Economy to
provide business solutions as part of FedEx services.
FedEx operating features go far beyond just shipping packages. FedEx has utilized the
phenomenon of mass customization by introducing new logistical and technical innovations.
FedEx has successfully integrated mass customization for business customers by helping them
expand their sales channels and ensure a high level of customer fulfillment thru applying ecommerce solutions. In 1998, FedEx developed a comprehensive solution for HP that would
manage the entire process, from order management to order fulfillment. HP’s online store has
enjoyed a revenue growth of over 500 percent annually since its inception. (SRI)
Business customers have outsourced critical supply chain functions to FedEx. Dell Computers
reduced its inventory and product cycle time, lowering costs, and improving customer
satisfaction. FedEx’s customized solution reduced Dell’s inventory turn-around time from 60-90
days through traditional suppliers to fewer than eight days. (SRI)
FedEx’s software and solutions also cater to business utilizing “just-in-time” manufacturing,
“build-to-order” manufacturing and global sourcing.
FedEx’s fast, reliable express
transportation services in conjunction with the intellectual capital from FedEx’s information
technologies enables business customer to reduce costs from inventory reductions. (SRI)
Four trends have driven the world commerce and shaped the global marketplace to produce and
unprecedented expansion of customer access to goods, services and information: (Annual
Report)
•
•
•
•
Increase in High-Tech and High-Value-Added Businesses
Globalization
Supply-Chain Acceleration
Growth of E-Commerce
FedEx was founded on the basis of innovation and invention. They have also focused on the
customer and look forward to create new technology and services that have evolved in the New
Economy. These trends have been the inspiration for many of the advancements in technology
and many services that the company now offers. FedEx is an organic organization that structures
its innovations and services to evolve with the needs of the four trends. For this very reason,
FedEx has become an industry leader and has gained a competitive advantage. FedEx needs to
remain focused and forward looking to ensure that the services they provided are on par with the
New Economy. They need to keep producing and improving the technological aspects of the
business.
5.
Human Resource Management
HRM objectives, strategies, policies, and programs are designed with the overall goal of
developing, engaging, and retaining talented people while aligning them with corporate values.
Core philosophies that shape HR practices:
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•
•
•
People-Service-Profits (PSP): - Created when the company was first founded, this
strategy expresses Smith’s conviction that taking care of employees is essential to
creating profits. “Take care of our people; they in turn will deliver impeccable service
demanded by our customers, who will reward us with the profitability necessary to secure
our future. People-Service-Profit: These three words are the very foundation of FedEx.”
(FedEx, Culture)
People-First: Formally introduced in 2003, this strategy comprises a group of programs
designed to meet the objective of facilitating employee growth. People-First was
implemented to provide an engaging work environment while encouraging employee
understanding of their duty to FedEx customers. The program aims to “promote 100%
responsibility and accountability, clear communication, clear expectations, and
competency through education.” (FedEx, Sustainability).
Purple Promise: Pledge. Attitude. Behavior: Introduced in 2006, this strategy provides a
basis for employees to compete collectively by sharing a single mode of believing,
thinking, and acting. The pledge is a personal commitment to “make every customer
experience outstanding.” FedEx employs four tools to embed this strategy, and its
expectations, in the corporate culture: 1) Policies, practices, and tools (established at the
outset), 2) Leadership by example (provides a basis in fact), 3) Communication
(storytelling that delivers and sustains), and 4) Recognition and reward (motivation for
change). (FedEx, Purple)
Others:
•
•
•
•
•
Service: The service objective is the constant and clearly stated goal of 100% customer
satisfaction 100% of the time. Service is expected to be performed with honesty, efficiency,
and reliability. Integrity, loyalty, and responsibility are key components.
Safety Above All: Provides for safety to be included in corporate strategies and business
planning, it includes: safety metrics, safety goal setting at the corporate level, management
bonus pay that is tied with safety goals, recognition awards, safety rating factors in
performance reviews of all employees, continuous improvement teams, and safety training
Lifeworks Program: Improves employee health and quality of life by providing stress
reduction, work/life support, self-care, education and counseling
Recognition and Awards Programs: Programs designed to motivate and influence
employees to show exceptional dedication and achieve extraordinary accomplishment. For
example: The Golden Falcon Award results from a complimentary report from a customer
commending employee efforts above and beyond the call of duty. The award consists of ten
shares of FedEx stock and a congratulatory visit or phone call from a senior executive.
EarthSmart@Work involves three components: 1) Inform: uses training programs and
projects to share new information and best practices internally to improve corporate
transparency. 2) Involve: enables team members to communicate ideas and become more
involved in sustainability efforts through the use of forums, discussion groups, and formal
feedback programs. 3) Innovate: A formal submission process built to capture employee
ideas and implement those that are in line with strategic goals and move FedEx forward.
(FedEx, GCR)
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Objectives, strategies, policies, and programs are clearly stated.
Employees have a clear
understanding of what is expected of them and what they can expect from FedEx. Performance
measures are aligned to employee service performance. This is backed by both monetary and
nonmonetary recognition and awards. Bonuses are based on the company’s service results.
Managers acknowledge positive contributions on the spot with rewards such as “quick cash”, gift
certificates, etc.
HR practices are highly consistent with the FedEx mission and policies. They can be seen in the
external and internal environments and the framework can be easily identified throughout the
organization. FedEx has a top-down approach to “walking the talk,” resulting in their industry
leadership for customer satisfaction.
HRM has programs in place to improve the match between employee-skill categories and jobs.
They use attitude surveys (such as Survey-Feedback-Action) and other devices (such as 360
degree performance appraisals) to assess employee satisfaction. Job analysis, up-to-date job
descriptions, and testing are used for employee selection, training, development, and salary
administration. FedEx has high employee satisfaction with a 91.5% retention rate (U.S.) for
full-time workers.
With the exception of FedEx pilots, all U.S. employees are nonunionized. FedEx believes this to
be a critical issue. Maintaining good relationships with employees and preventing labor
organization is crucial to the FedEx business model. FedEx Ground utilizes a standard contract
with its independent owner-operators who conduct line haul and pickup/delivery functions. This
has been a source of controversy and claims have been made that FedEx has improperly
classified owner-operators as independent contractors. FedEx plans to vigorously defend their
model. However, in response to lawsuits, FedEx is introducing a new Independent Service
Provider test model.
FedEx identifies their employees as an essential source of information. Employees are
encouraged to be innovative and to make decisions that advance quality goals. People at all
levels have the opportunity to develop and contribute to corporate strategy. Quality of work life
is of utmost importance.
To reach its aggressive service objectives, FedEx uses a Service Quality Indicator (SQI). This
12-component index depicts how performance is viewed by customers. A senior executive leads
a Quality Action Team that is assigned to each service component in the SQI. Management
tracks trends and meets daily to assess performance. This data is used in cross-functional teams
involved in HR, planning, innovation, etc. The SQI is directly linked to corporate planning
which begins with the CEO and executive planning committee. This model assures involvement
and development of front-line, support, and management personnel company-wide. Individual
performance objectives are established and monitored. Executive bonuses are tied to
performance of the whole corporation. These programs have proven to positively impact past
performance and will continue to lead to future achievements. FedEx has averaged better than a
95% customer satisfaction rating and, in an independent air-express customer survey, 53% gave
FedEx a perfect score compared to only 39% for the next best competitor (Baldrige).
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FedEx employees work in a dynamic and complex environment and management must be able to
quickly shift from one strategy to another. FedEx employs methods to gather and assess data
that may contribute to root problems, as well as identify areas for future development. FedEx
future performance will be positively impacted by continuing their current trends and upholding
their PSP philosophy.
FedEx is known world-wide for employee development. HRM has developed strategic
flexibility and operates as a learning organization. Employees at all levels are encouraged to
participate in strategic management. Programs, such as EarthSmart@Work, are in place to
facilitate this process. HRM provides a competitive advantage and is integral to FedEx success.
FedEx HRM outperforms similar corporations. For 12 out of the past 13 years, FedEx has been
on Fortune’s “100 Best Companies to Work For” and the recognition extends to 16 affiliated
lists worldwide (Shutan). FedEx has been cited as one of the best places to work in more than 27
countries around the world (FedEx Annual Report).
The four industry leaders are FedEx, UPS, DHL, and TNT. Although strong market rivals,
FedEx and UPS share similarities, both: have a high dedication to their employees, believe
employee satisfaction is essential to create customer satisfaction, heavily invest in employees
and promote from within, and have strong employee involvement in strategic planning processes.
FedEx and UPS have stable teams running critical business components. Alan Graf has been the
FedEx CFO since 1998; Smith has been CEO since he founded FedEx. The UPS CEO worked
his way up through the company for 34 years to his present position. DHL and TNT are not as
steady. In the U.S., TNT’s CEO has changed twice in the last 10 years, and DHL has had four
different CEOs within four years. Personnel stability is an important predictor of successful
corporate policies and CEO turnover creates an erratic ripple effect throughout an organization.
FedEx is the only company in this category that uses the 360 degree HR management system,
and FedEx has the best HR system in the business (Latin).
FedEx HRM managers use innovative and appropriate techniques to evaluate and improve
corporate performance. FedEx strives to create a unique relationship with their employees and to
be as innovative and forward thinking in employee relationships as they are in the other aspects
of the organization. Through their intranet, employee videos, in-house television network, face
to face meetings and other vehicles, HRM delivers a steady flow of stories that embody the
Purple Promise (Thornley). HRM uses an abundance of techniques to evaluate and improve
corporate culture, and is always developing new methods to do so. Some of the methods used
are:
•
•
•
•
•
LEAP (A Leadership evaluation and training program)
A Promote From Within policy
Open Door programs
Guaranteed Fair Treatment policies
SPEED (A competency assessment planning system used to assess readiness and
promotability, and create plans to strengthen competencies through educational
programs)
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•
CESD (Center for Employee Self-Development used to plan individual development
and provides training and advancement curriculums)
Diversity is a highly priced competitive advantage for FedEx. In the U.S, minorities hold 27%
of management roles and are 43% of the total workforce. Diversity Councils have been
implemented to foster diversity education and communication, with a goal to increase diversity
awareness and initiate projects within their geographic regions. FedEx strives to meet diversity
objectives by contracting directly with minority and women owned businesses, and by
encouraging the inclusion of minority and women in the subcontracting plans of their entire
supplier base. FedEx has made the list of “40 Best companies for Diversity” by Black Enterprise
magazine for the 5th straight year. (FedEx, Diversity)
FedEx has one code of conduct that applies to FedEx officers, directors, and employees. The
FedEx Code of Business Conduct and Ethics comprehensively lists expectations and guidelines
designed to promote a corruption-free environment. The Code adjusts to each country by virtue
of its policy on laws, which calls for employees and suppliers to comply with the laws and
regulations that relate to their specific business area. Therefore, some laws affect everyone,
while others concern only specific activities. If conflicts exist between FedEx policies and
geographic areas laws, employees must let local law override company requirements. Managers,
including HR managers, are responsible for their own and for their employees’ adherence to the
Code. FedEx embraces and celebrates diversity, which is necessary given their global economy.
As part of employee development and pathways to leadership, employees are routinely given
international assignments to prepare them for managerial positions.
Outsourcing is primarily associated with the driver segment of FedEx Ground. FedEx owneroperators are classified as independent contractors. They receive no benefits, no overtime, no
sick leave, no insurance, and they pay for (and maintain) their own vehicles. Although the
criticism remains that FedEx has an unfair advantage due to old laws that allow them to classify
owner-operators as independent drivers, FedEx maintains that their drivers are properly
classified. FedEx outsources this business segment and supplies modest oversight, which allows
owner-operators to control their own delivery business and grow it in their own way. (James)
The HRM manager plays a key role in the strategic management process and is involved at all
levels. FedEx operates in a multichannel environment. To avoid fragmentation, HRM uses a
holistic view and promotes cross-channel decision making processes. In domestic and foreign
operations, self-managing functional work teams work together in a decision making structure
designed to align priorities, plan resources, and coordinate activities. This method improves:
quality, productivity, employee satisfaction and commitment.
6.
Information Technologies
The FedEx Information Technologies program is one of the strongest and most innovative
programs in the world – and they continue to make major advancements. Their ultimate goal to
make it possible to have both people and businesses connect and collaborate all over the world.
The network that makes this happen is Access which is the availability to transform through
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connectivity (FedEx). They have two divisions which concentrate the technology aspect of their
company.
FedEx launched FedEx Innovative Labs which is “an information technology project designed to
create an atmosphere of collaborative thinking around critical technologies such as advanced
optics for scanning, robotics, pervasive computing, social networking and more” (FedEx). These
labs create new and improved technological services that FedEx can offer their customers. Two
successful programs FedEx has also developed are the Digital Assisted Dispatch System and
Electronic Trade Documents (ETD). Both have advanced FedEx to better service their
customers.
They also have their own Institute of Technology at the University of Memphis where science,
business and industry are able to work together. The institute has over 150 employees that devote
their time working in areas such as artificial intelligence, biotechnology, geospatial analysis,
multimedia arts and nanotechnology (FedEx).
Recently, they launched Global Business Data Visualization Experience. FedEx takes pride in
creating the ultimate customer experience. This new feature furthers the user experience. It gives
the user an interactive view of world data. As long as FedEx continues to make technological
advances, their customer base will continue to grow and it will also give them a greater
competitive advantage.
D.
Summary of Internal Factors
FedEx’s core competencies are its high-performance culture, strong brand image and large scale
of operations. FedEx’s distinctive competencies are its technological infrastructure and its
ability to be a leader in cutting edge ways by adapting and applying technology in new and
innovative ways. The most important factors to FedEx and the shipping and freight industry are
its technological infrastructure and their ability to develop business solutions to provide and
serve customers with products and services that are ahead of the times. It is important for FedEx
to remain a pioneer in providing and implementing business solutions and technologies so that
FedEx can acquire new customers and retain current ones. This is also important in maintaining
and promoting the FedEx brand, which is known for being a leader in innovation. FedEx may
benefit from continuing and expanding on partnering with technology savvy organizations that
have the ability to contribute and share to technological and innovative advancements. FedEx
would benefit from such collaborations; however FedEx would not be wise to completely
outsource these tasks.
Table 2 illustrates and analyzes the strengths and weaknesses that FedEx faces. Each factor is
weighted from 1 (most important) to 0 (not important) and then rated from 5 (outstanding) to 1
(poor) based on the company’s response to that factor. The weight and rating are multiplied by
each other to generate a weighted score. An average firm in an industry has a total weighted
score of 3.0. The rating is a judgment regarding how well the company is dealing with each
specific internal factor, with 1.0 being poor and 5.0 being outstanding (Wheelen and Hunger).
FedEx has a total weighted score of 2.99 with is just approaching average for the average for the
industry.
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INTERNAL FACTOR ANALYSIS SUMMARY (IFAS Table): FEDEX
Internal Factors
Weighted
Score
Comments
Weight
Rating
0.20
0.10
0.15
0.05
0.10
4.50
3.00
4.75
2.00
3.00
0.90
0.30
0.71
0.10
0.30
Good, need to maintain
Growing global presence
Good, but need innovations
Quality Customer Service
0.15
0.10
0.15
1.00
3.00
1.50
0.15
0.30
0.23
Difficult for communication
Recovering
Moving in wrong direction
Strengths
Strong brand image
Large Scale of Operations
Technological Infrastructure
High Performance Culture
Leader in Overnight Delivery
Weaknesses
Decentralized Operations
Financial Position
FedEx Freight-Negative
Operating Margins (3 years
straight)
Total Scores
Table 2 – IFAS Table
1.00
V.
Analysis of Strategic Factors
A.
Situational Analysis
Large Market Share
2.99
Table 3 illustrates the Strategic Factor Analysis Summary Matrix for FedEx. FedEx’s SFAS
Matrix total weighted score is a 3.03, which is slightly above the average firm. The average firm
in an industry is always a 3.0. (Wheelen and Hunger) The strategic factors identified by the
SFAS Matrix are imperative factors to consider in strategic planning.
FedEx’s current financial situation (W2) and the current state of the economy (T1) are directly
linked and pose the greatest risks for FedEx. FedEx’s financial situation fluctuates in correlation
with economic changes. This is due to businesses cutting back on expenses and consumers
reducing e-commerce purchases when the economy slows down, which results in a reduced need
for shipping. Rivalry among competitors is also a major risk factor; however, FedEx’s
competitors face the same risks related to economic correlations as FedEx. The nature of the
business for FedEx and competitors leave them vulnerable to these risks because they do not
have any control or power to influence or change the state of the economy or the current
economic situation. FedEx could however, utilize economic forecasting to assist to conserving
company resources for economic slowdowns.
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ed
Sc
Sh
or
or
e
t
Im
ter
m
Lo ed
ng iate
C
om
m
en
ts
W
eig
ht
R
at
in
g
Strategic Factors
S1 Strong Brand Image (S)
W
eig
ht
STRATEGIC FACTOR ANALYSIS SUMMARY (SFAS Matrix): FEDEX
0.15
4.25
0.64
X
S3 Technological Infrastructure (S)
W2 Financial Position (W)
W3 FedEx Freight-Negative
Operating Margin (W)
0.15
0.05
0.10
3.50
1.90
2.90
0.53
0.10
0.29
X
X
X
O2 Outsourcing Trends by
Customers (O)
O3 Technology Advancements (O)
T1 Current Economic Situation (T)
T2 Rivalry amoung Competitors (T)
0.20
1.50
0.30
0.15
0.05
0.15
4.25
2.21
2.90
0.64
0.11
0.44
Total Scores 1.00
X
X
X
X
X
X Increases customer
base
X Cutting-edge
X Recovering
Moving in Wrong
Direction
X Leads to increaced
Sales
X Increases innovations
Recovering
X Need to maintain
Marketshare
3.03
Table 3-SFAS Matrix
The negative operating margin for the FedEx Freight division needs to be closely watched and
analyzed. These margins have been negative for three consecutive years, which raises a red flag.
Management needs to consider re-engineering the division to make it profitable or eliminate it
altogether and focus on the aspects of the corporation that are generating profits.
The most important strategic factor that the matrix identifies historically and predicts will
continually affect FedEx in the future (internally and externally) is technology advancements and
innovations.
B.
Review of Mission and Objectives
FedEx’s mission and objectives focus on producing superior financial returns through focused
operating companies, meeting customer expectations and demands, and conducting corporate
activities in a safe, ethical and professional manner. In light of the key strategic factors
identified in the strategic factor analysis summary, FedEx should modify their mission statement
and objectives by incorporating their commitment to advancements technological innovations
and customization of business solutions for customers. The logic behind this recommendation is
that as new technologies have emerged, business needs have evolved, and the services FedEx
offers have increasingly involved customizing complex integrated logistics solutions for B2B
and e-commerce customers. FedEx has been a pioneer in utilizing emerging technologies to
customize systems that directly interface with FedEx. The business solutions and services have
played a major role in the popularization of just-in-time inventory systems and have
revolutionized the shipping systems. Continued growth in implementing technological
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innovations in the business operations as well as in the business solutions provided to customers
is imperative to remain an industry leader and gain market share.
VI.
VI. Strategic Alternatives and Recommended Strategy
A.
Strategic Alternatives
The TOWS Matrix (Exhibit 2) is a useful tool for in identifying strategic alternatives based on
the Strengths, Weaknesses, Opportunities and Threats. The TOWS matrix identifies many
strategic options for FedEx to consider.
The first alternative for FedEx to consider is to keep the current strategies already in place and
focusing on fine-tuning it. FedEx would continue to push a high-performance culture focused on
customer satisfaction by meeting distinct customer needs. They utilize the “compete
collectively, operate independently, and manage collaboratively” to segment the operating
companies so that each company can continue focus on its specific services and products. The
advantage of this option is that FedEx has made extensive efforts in organizing the organization
and has policies and procedures place to support the existing strategic. The disadvantage of
keeping with the current plan is that the economy is at a standstill and the financial position of
the organization is suffering.
FedEx could pursue a growth strategy by utilizing the strong brand image and large scale
operations to target newly developed countries to expand internationally, which could help
FedEx to increase its market share in the industry. FedEx could also increase partnerships and/or
acquire smaller delivery companies in developing countries to increase market share and push
the FedEx Brand. They would also want to incorporate their technological innovations and
services to the new partnerships or acquisitions to provide new services in those areas in addition
to the current services offered. This horizontal growth strategy would increase market share,
expand the customer base and increase FedEx’s global presence. The cons for this strategy are
the required cost of capital for the expansion will initially create a hardship on the organization
as a whole and it is difficult to break into new countries and their markets. Additionally, if
FedEx enters alliances or creates partnerships, rather than expanding thru acquisitions, they will
not gain a competitive advantage.
Retrenchment is a third alternative corporate strategy alternative for FedEx. They could
restructure and centralize operations to reduce redundancies across the operating companies. By
doing so, there are many expenses and employment functions that could be reduced to provide a
cost savings. FedEx could also consider restructuring, selling or dissolving the FedEx Freight
Division. This division has delivered negative operating margins for 3 years in a row. By
eliminating this division, FedEx could use the resources for its divisions that are profitable,
which would boost the financial position of the organization.
The cost leadership business strategy is also an alternative for FedEx to consider. FedEx could
lower their prices. By charging less than competitors, FedEx would be able to increase its
market share and gain a competitive advantage. The drawback to this option is that FedEx
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would have to cut operating costs to counter act the price reduction. These cutbacks would have
to include staff and any unessential expenses which will increase the pressure for the remaining
employees as there will be more work to do and less people to do it. FedEx could supplement
this obstacle by increasing the number of its fuel suppliers to create more competition among the
suppliers in an attempt to drive down the price. The disadvantage to that tactic is the risk of
alienating the suppliers that FedEx has established good relationships with.
Internal Factors Strengths (S)
Weaknesses (W)
(IFAS Table X)
S1 Strong brand image
S2 Large Scale of Operations
S3 Technological Infrastructure
S4 High-Performance Culture
External Factors
S5 Leader in Overnight Delivery
W1 Decentralized Operations
W2 Financial Position
W3 FedEx Freight -Negative
Operating Margins
(3 Years straight)
(EFAS Table X)
Opportunities (O)
O1 International Expansion
O2 Outsourcing Trends by
Customers
O3 Technology Advancements
• Target newly developed
• Restructure and Centralize
countries to increase market share operations to reduce
redundancies across
• Use technological innovations to
operating companies
to provide business solutions for • Restructure or sale struggling
businesses wanting to outsource
FedEx Freight Division
supply-chain/logistical needs
due to its poor operating margins
Threats (T)
T1 Current Economic Situation • Use Brand Image and highT2 Rivalry Among Competitors
Performance culture to cut
T3 Global Warming and
cut prices to increase market
Environment Regulations
and gain a competitive advantage
T4 Rising Fuel Costs
• Create partnerships or acquire
smaller delivery companies with
delivery networks in developing
companies and use the FedEx
and innovations to increase
market share
• Contine to seek and utilize
enviornmentally friendly
operating alternatives
• Increase the number fuel suppliers
to create competition and drive
EXHIBIT 2-TOWS MATRIX
The final alternative identified by the TOWS Matrix is the differentiation business strategy.
FedEx could set itself apart from competitors with its unique technological innovations. They
have been a pioneer in the industry in tweaking new technologies to offer cutting edge and
customized business solutions for customer’s supply-chain and logistical needs. The advantage
to this strategy is that outsourcing becoming a major trend and FedEx has the tools to serve the
distinct needs for businesses wanting to outsource shipping/logistical needs. E-commerce and
B2B has greatly increased the traffic for shipping and logistics and FedEx is an industry leader in
customizing and creating unique systems to fulfill these needs. The advantage to this strategy is
that FedEx has the tools and resources to meet growing outsourcing demands and offering these
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services would give FedEx a competitive advantage. The con is that it is risky to move further
away from the original basis for which the company operates. They in part would be entering a
new industry. If the services were not above par, FedEx would be risking its strong brand image
and could lose existing and potential customers. Another way that FedEx could differentiate
itself from competitors is to rigorously peruse environmentally sustainable operating alternatives.
If FedEx could implement massive green operating components, in the form of fuel, electricity,
etc., they could stand out above competitors and gain an advantage. The disadvantage to this
approach is that the cost to seek and implement the amount of green alternatives to set
themselves above competitors would be immense and greatly impact the financial position of the
organization.
B.
Recommended Strategy
FedEx’s financial position is directly related to the state of the economy. For this reason, FedEx
would be best suited to stay committed to and fine tune its current “compete collectively, operate
independently, and manage collaboratively” strategy. The economy appears to recovering, so it
would be in FedEx’s best interest to remain focused in the current strategic plan. The
organization has been gradually expanding to increase its global presence and adding to the
customized services it provides. The combination of the recovering economy, slow expansion,
and continued technological innovations should result in a better financial position in the longrun. FedEx’s short-run plan should be to remain conscientious of operating expenses and
continue to meet new business outsourcing needs in the supply-chain and logistics areas. FedEx
should be cautioned to keep a close eye on the communications between the distinct operating
companies to ensure that redundant expenses across the operating companies are eliminated.
VII. Implementation
FedEx is in Stage II of the corporate development cycle. The current “compete collectively,
operate independently, and manage collaboratively” strategy is the best option for FedEx at this
stage of the cycle. The three-fold plan creates synergy across the operating companies while
pushing the brand, fulfills distinct customer needs, and enables the Board and top management to
keep an eye on it all. The implementation and monitoring of the plans progress starts at the top
of the organization and filters down to every employee. The operating companies have been
structured so that each can meet the needs of its distinct customers. Within the various operating
companies, it is up to the upper management to make sure that the programs and procedures put
in place for the employees of FedEx to carry out. Important programs are maintaining a proper
organization structure, operating budgets, standard operating procedures, sustainability
programs, employee performance reviews, customer service surveys and feedback, and customer
service.
FedEx’s high-performance culture drives employees to excel at their jobs. In a service industry,
such as FedEx, every employee is a key player in implementing the strategic plan. It is
imperative for FedEx management and strategic planners to continually provide FedEx
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employees with the evolving strategic plan’s policies and procedures so that the employees at
every level can make it happen.
VIII. Evaluation and Control
FedEx’s information system is capable of providing sufficient feedback on implementation
activities and performance. FedEx customer service representatives can access customer
information in real-time for any one of or a combination of customers. Managers and key
personnel are also able to access this information. Access to real-time information in this way,
gives FedEx the ability to pull and analyze what customers are ordering, from which divisions
the orders are from whether it from one division or a combination of divisions, which is
imperative for performance analysis and forecasting. FedEx’s information systems also enables
them to monitor and pin-point problems and create solutions to fix them in
FedEx can analyze and review financial information on functional and consolidated levels. Each
operating division reports its financials to the parent company FedEx, which them consolidates
then. The corporation is able to report and analyze the financials for the corporation as a whole,
as well as each operating division independently. It is important for FedEx to evaluate financials
in both ways, so that can analyze how the operating companies are performing individually, as
well as the corporation as whole.
Benchmarking is important for FedEx so that they can evaluate their activities and performance.
It is important for the organization to analyze their performance and service levels so that they
can rectify existing and potential problems, modify policies and procedures, and create
enhancements. Benchmarking is an essential tool for FedEx to be able to provide superior
customer service, as well as continue to meet their customer’s distinct needs.
FedEx’s standards and measures are appropriate to ensure conformance to the recommended
strategic plan. FedEx has an industry superior technology system to measure performance, a
highly measurable sustainability objectives and a series of employee performance award as
detailed in the corporate culture section. The performance awards reiterate the high-performance
culture of FedEx and serve a motivation to excel in providing superior customer service.
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